This niche alert focuses on a proven source of premium: existing clients. In our usual fashion, we are coming at this a little differently.
We all remember the times when it was feasible, and lucrative, to replace old Whole Life, Universal Life or Variable Life policies that were falling apart. It was an easy sale, preying on the client’s experience in a non-guaranteed contract to get them to move to a new NLG contract. Of course, most of us neglected to think about the unintended consequences: premium timing issues and the fact that this new NLG contract was almost certainly the last policy we were going to be able to sell that client based on delivering a lower premium. Bad news for the producer’s future income for sure.
So here’s how to get back in that business and deal with both the premium timing issue and keep future sales in play via the presence of real cash value. It’s all based on the behavior of some NLG contracts when they are placed in a reduced paid up status. If they have been funded by a combination of 1035 exchange funds and ongoing premium, one of two things is going to happen:
Either a huge reduction in the death benefit or a surprisingly modest reduction, and it is this last scenario that creates opportunities. In fact, by placing this type of policy into a reduced paid up status and allocating the ongoing premium to a new contract, three things happen:
• Premium timing issues are solved. There will be no further premiums paid into the existing contract, so no way to screw up the timing of premium payments.
• Premium savings for the client. The reduced face amount is high enough that the current premium commitment more than funds the new policy we want to sell that brings the client’s total line of insurance back to the original face amount.
• Last, we preserve future flexibility and sales opportunities using a contract that has real cash value as the product of choice for the new coverage.
You all know some of the favorites in that space, but with new illustrative rates hitting, that landscape may change. Accordia Life continues to be a “stealth” carrier for this kind of sale: great premiums, real cash and a conservative indexing story that we can all likely recite from memory at this point. Using a product like the Survivorship Builder or the Lifetime Foundation makes sure there is real cash value, just in case there is a new, more efficient product available at some point in the future. With these contracts, the client has some seed money to use via 1035 exchange if that ever comes to pass.
There are a number of carriers, products and policy issue years that are ripe for this, but honestly, you should be grabbing a reduced paid up inforce ledger on everything of a reasonable size that was funded by a combination of 1035 exchange and ongoing premium. The hit rate will be high enough to make it more than worth your while.