(Presentations were created using Wealthy and Wise®.)
The way indexed deferred annuities are priced (short-term money vs. long-term money for indexed life insurance) leaves very little budget for the issuing company to use for hedging. Consequently, the caps can be much, much lower for annuities (in many cases, 3.00% vs. 10.00%+ for indexed life policies). Also, with the life policy, the issuing company can afford to take a thinner margin because of the mortality profit from the cost-of-insurance charges.
The higher caps introduce the opportunity to illustrate higher future values for the life insurance and, of course, all this couples with the superior tax advantages of life insurance (income tax free loans from cash values and tax free death benefit) vs. taxable cash flow and death benefits from annuities.
To prove the point, examine the following graphic from InsMark’s Wealthy and Wise®.
Alex and Susie Snow are 65 and 60. They own an indexed annuity with a current value of $500,000 but are stuck with a 3.00% maximum crediting rate. Their cost basis is $430,000. The graphic illustrates the impact of replacing the annuity with an indexed survivor life policy and providing the cash flow for the life policy’s five scheduled premiums of $98,605 by way of after tax withdrawals from the annuity – a procedure calculated by Wealthy and Wise® which depletes the annuity. (In this case, five years of premium payments are sufficient to avoid classifying the life policy as a modified endowment contract thereby preserving tax free access to its cash values.)
Wealthy and Wise® provides a very quick and simple way to make this evaluation with minimal data input. It also provides you with a platform to discuss other planning opportunities with what is likely to be a very impressed client.
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InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)
We created Referral Resources to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice. You can utilize your choice of insurance company, there is no commission split, and you don’t have to change any current relationships. They are very familiar with running InsMark software.
Please mention my name when you talk to a Referral Resource as they have promised to take special care of my readers. My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.
Save time and get results with any InsMark illustration. Contact:
- Ben Nevejans, President of LifePro Financial Services in San Diego, CA.
If you are not licensed for Wealthy and Wise®, contact Julie Nayeri at 1-888-InsMark (467-6275) or julien@insmark.com for licensing information. Institutional inquiries should go to David Grant, Senior V.P. – Sales, at dag@insmark.com or 1-925-543-0513.
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