Single Premium Life: The Legacy-Builder

SPECIAL RETIREMENT SUPPLEMENT - Winter 2011 | By Brenda Gempler

When it comes to wealth transfer, few solutions work as simply or as well as single premium life (SPL) insurance. Yet many banking customers who would be ideal candidates for SPL are unaware of the product’s features and how it might fit into their overall financial and estate-planning strategy–simply because no one has started the conversation with them.

Bank financial representatives are in an ideal position to identify potential SPL clients from their current book of business, help them understand its legacy-building features, and successfully pair them with the SPL product that delivers great all-around value, not just the largest benefit amount.

SPL Candidate Profile

Single premium life insurance is an excellent wealth transfer option for clients who:

• Are in or near retirement (between the ages of 60 and 80)
• Are invested in multiple accounts
• Have $10,000 or more set aside for loved ones, and
• Are concerned about how income taxes, final expenses and probate could impact their beneficiaries.

The first question a financial representative should ask a client is, “How do you plan to use your money in retirement?”

While a fixed deferred annuity may be a good choice for asset accumulation, it’s important to consider the tax implications for beneficiaries who will inherit the burden of income taxes along with the annuity’s contract value.

For those seeking to transfer their wealth income tax-free, single premium life insurance is a better option. SPL products are tailor-made for clients who have assets they don’t plan to use. This financial solution–turning a one-time premium payment into a larger, federal income-tax-free death benefit–is all about maximizing a legacy, not accumulating wealth.

About half of the customers who walk through your branch doors don’t have a will–and while many people want to leave some kind of legacy, they often mistakenly believe they don’t have enough wealth to justify estate-planning. Single premium life insurance could be the perfect solution.

Car buyers tend to be smart shoppers. They not only compare sticker prices, they kick the tires, weigh the pros and cons of different features, analyze warranties and study customer reviews. Unfortunately, few people take the same time when shopping for insurance and investment products.

Not all SPL products are created equal. While the death benefit payout amount is always a consideration, here are five value-added features to look for when selecting an SPL product:

1. Simplicity – No illustrations mean a simpler process and no guesswork. Simplicity makes the product easier to explain and to sell. Choose an SPL with provisions that are clearly stated and that delivers a quick, hassle-free quote for the client.

2. Transparency – Unlike booking an airline ticket advertised at a specific price but loaded with hidden fees, when it comes to SPL, the interest rate quoted should be the interest rate the customer gets. In other words, watch for any difference between a “gross” interest rate and a “net” interest rate. Transparency helps eliminate unpleasant surprises, and that translates into a happier client.

3. Broader rate classes – Look for SPL products that focus on offering reasonably healthy seniors attractive rates they can qualify for, not those designed for an elite few.

4. Access – Access to funds can be a big concern for clients. While they may not plan to use the money and have it earmarked for their beneficiaries, many clients want to know they can access their savings if they need to – whether they face a catastrophic illness or market losses force them to spend their nest egg faster than planned. Some companies have an all-or-nothing access policy that requires a full surrender of the policy. Help clients achieve peace of mind; find an SPL product that offers flexible withdrawal options.

5. Support – As insurance and financial services companies cut costs, external wholesaling support and access to marketing, training or legal resources are increasingly harder to come by. Don’t underestimate the value these resources bring to branch-based financial reps – and to clients. Do business with SPL carriers that are committed to the product and to your success.

Financial representatives play a critical role in helping clients understand their options for accumulating wealth, but it’s important not to overlook the other part of the distribution equation: transferring a legacy to beneficiaries. With single premium life insurance, there are no investments to manage, no worries about market risk and no income taxes for beneficiaries.

Adding SPL to the estate-planning mix gives financial reps an effective, easy way to increase the value and security of a client’s estate. And that’s a great way to deepen a client relationship and grow business.

Brenda Gempler is managing director of Key Accounts for Symetra Life Insurance Company.