While it can be a monotonous experience, getting a life insurance policy is often an essential task to ensure that your most valuable assets, family and business, are protected. Permanent life insurance, with cash values, can be an aid to handling the risks that life poses. However, what if the policy you currently own is not necessarily the best one to suit your present and future needs? In such a situation, it is essential to consider all your options so that it better suits your changing needs. Having an expert in policy repurposing is necessary for evaluating your options. We believe that any life insurance should be evaluated through two primary metrics: leverage, and tax efficiency.
Leverage is the measure of premium dollars vs. benefits while tax efficiency measures the value of life insurance benefits compared to investment alternatives. These two metrics inhere in both living benefits and death benefits of any life insurance policy. It is up to you and your advisor(s) to decide which benefits are most important to you. Next, it is essential to gather relevant facts about the existing life insurance policy. You can either use the most recent policy statement you received from your carrier or ask the provider for an “in-force” illustration.
Additionally, it is important to evaluate your underwriting profile to determine the improved options that may be available to you. We have a simple tool, the “Underwriting Advocate” (see link below), which allows us to easily gather the information needed for obtaining anonymous feedback from quality insurance providers. This is a huge time saver that narrows the focus as to which company will best provide the leverage and tax efficiency to match the client’s needs and desires. The final step of the repurpose is the smooth execution of transitioning out of the old policy into the new. A “how to” expertise is required to preserve the leverage and tax efficiency so that the client’s new objective is achieved. The greatest growth of policy repurposing we see today is helping clients take an existing permanent policy, with cash values, to a new policy that adds Long-Term Care to their life insurance benefits.
To help illustrate the policy repurposing concept, let’s look at what was recently done to help Tony (56). He was hoping to improve several existing whole life policies on him into something that will provide life and Long-Term Care benefits that would cover him and his wife, Kate (55). Tony has 5 whole life policies combined to an aggregate cash value of approximately $155,000
and death benefits totaling $550,000. A successful career has given Tony an opportunity to rethink the existing life policies that will only provide coverage in the event of his death. His new perspective provided us a way to introduce a preferred alternative enabling him to now provide Long-Term Care coverage that includes his wife. The repurpose solution involves transferring all of Tony’s individual life policies into an income generating annuity spanning 10
years. The income from the annuity is paid into a specially designed life policy that covers both Tony and Kate so that if either one of them needs Long-Term Care benefits, they are both eligible to receive up to $8,200 per month over 5 years. If both Tony and Kate pass away with no need of Long-Term Care, their kids will receive approximately $275,000. Having professional help in evaluating your existing life insurance policies can unlock great value for you. The trained specialists at Acru Insurance have experience in helping clients improve leverage and tax efficiency by reevaluating existing policies. Who knew monotony could create so much value?
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