Blog #190: Crystal Clear — and Simple | Bob Ritter's Blog, ideas for financial service professionals

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(Presentations in this blog were created using the InsMark® Illustration System)

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Bob Ritter's Blog #190 Crystal Clear – and Simple image

InsMark has several sophisticated ways to illustrate a retirement plan that features cash value life insurance – see Blog #166 and Blog #167 for examples. Click here for 40+ other examples.

The purpose of this Blog is to show you an ultra-simple presentation.

Case Study

Laura Lake Johnson, age 35, is an established landscape painter specializing in seascapes in watercolor and oil. She has a four-year old daughter, Caroline.

As a self-employed artist, retirement planning is solely Laura’s responsibility. She is reviewing an illustration for a cash value life insurance policy that includes a substantial $1,087,792 death benefit to help care for Caroline should anything happen to Laura. It also illustrates $1,500,000 of total, after tax, retirement cash flow for Laura.

As is typically the case, her Basic Illustration is 35 pages long, and although it includes valuable information, it is a dreadful way to introduce life insurance. What can you add to this tedious document that not only brightens the presentation but makes it more easily understood by Laura?

My suggestion is InsMark’s Life Plan – one of the most straightforward reports from the InsMark Illustration System. By including it as a forerunner to the Basic Illustration, communication with Laura can be significantly improved.

This is the key graphic from Laura’s Life Plan illustration:

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Bob Ritter's Blog #190 tax deferred accumulation summary of pre retirement and retirement years Image

Click here to see the full report.

You may want to include an illustration with a little more detail. If so, I suggest adding our Illustration of Values that is also available in the InsMark Illustration System. Click here to view it for Laura in tandem¹ with the Life Plan illustration.

¹	When you want to combine more than one illustration from the same Workbook into one continuous presentation with consecutive page numbering, use the following selection on the lower right of the Workbook Main Window:

Workbook Preview or Print

We refer to these Supplemental illustrations as “diet” proposals — plenty of white space with no numbers or text printing edge to edge.

I am not suggesting that you ignore Laura’s 35-page Basic Illustration — only that you disregard it as your primary presentation tool. It is complex because it serves too many masters: actuarial, legal, compliance, you — and finally, Laura.

Please understand that the purpose of InsMark is to augment the carrier’s Basic Illustration; however, our Supplemental Illustrations are not valid without this footnote (or some carrier-approved variation of it) appearing at the bottom of our numerical data:

This illustration assumes the nonguaranteed values shown continue in all years. This is not likely, and actual results may be more or less favorable. This illustration is not valid unless accompanied by a basic illustration from the issuing life insurance company.

While InsMark has plenty of advanced illustration capacity, our Supplemental Illustration formats are what has made us so popular. I hope they prove useful to you.

Suze Orman and Dave Ramsey

One of many objections you are sure to hear from Suze Orman and Dave Ramsey is this: “Look at the lousy first-year cash value – what a rip-off!”

IUL #1 is not a rip-off – it is a deliberate design that maximizes mid-term cash value and retirement cash flow.

To prove the value of IUL #1, I re-did the illustration using high, first-year cash values (IUL #2). I then compared IUL #1 with IUL #2 using our InsMark Compare module also in the InsMark Illustration System. IUL #2 has higher cash values in years 1 – 7. After that, IUL #1 has superior cash values. The impact of high, early cash values on retirement cash flow is significant as IUL #2 suffers a $10,000 annual reduction in after-tax, retirement cash flow.

IUL #1 is the better choice by a considerable margin.

Click here to see the results of the comparison. (Both IULs are from the same life insurance company and are identical except IUL #2 includes the option for high, early cash values.)

Crystal clear and simple? You bet!

InsMark’s Digital Workbook Files

If you are (or become) licensed for the InsMark Illustration System and would like some help creating customized versions of the presentations in this Blog for your clients, watch the video below on how to download and use InsMark’s Digital Workbook Files. Then download the Blog190.zip file below for the digital workbook file you can load into your InsMark Illustration System.

New Zip File Downloaders
Watch the video.

Digital Workbook Files For This Blog

Blog190.zip

Experienced Zip File Downloaders Download the zip file, open it, and double click the Workbook file name to open it in your InsMark System.

Before downloading and reviewing any files, be certain you have installed the most current updates to your InsMark System(s). Do this using Live Update available under Help on the main menu bar of the System or this icon on the main menu bar:

Note: If you are viewing this on a cell phone or tablet, the downloaded Workbook file won’t launch in your InsMark Systems. Please forward the Workbook where you can launch it on your PC where your InsMark System(s) are installed.

Licensing InsMark Systems

To license any of the InsMark software products, visit our Product Center online or contact Julie Nayeri at julien@insmark.com or 888-InsMark (467-6275). Institutional inquiries should be directed to David Grant, Senior Vice President — Sales, at dag@insmark.com or (925) 543-0513.

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.

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InsMark's Advanced Consulting Group click here to receive more information

Testimonials

“The reason I use InsMark products is because they are so good at explaining financial concepts to all three parties: 1) the producer trying to explain the idea; 2) the computer technician trying to illustrate it; 3) the customer trying to understand it.”
Rich Linsday, CLU, AEP, ChFC, InsMark Platinum Power Producer®, Top of the Table, International Forum, Pasadena, CA

“InsMark is the Picasso of the financial services world — their marketing savvy never fails to amaze me.”
Doug Peete, Past President, Top of the Table, and InsMark Power Producer, Overland Park, KS

“Bob Ritter is a master of illustrating complex issues in a simple easy-to-use manner that definitely helps you better serve your clients.”
Gary Curry, President and CEO, ORBA Insurance Services, Inc., InsMark Platinum Power Producer®, Gold River, CA

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Important Note #1: The hypothetical values associated with this Blog assume the nonguaranteed values shown continue in all years. This is not likely, and actual results may be more or less favorable. Life insurance illustrations are not valid unless accompanied by a basic illustration from the issuing life insurance company.

Important Note #2: The information in this Blog is for educational purposes only. In all cases, the approval of a client’s legal and tax advisers must be secured regarding the implementation or modification of any planning technique as well as the applicability and consequences of new cases, rulings, or legislation upon existing or impending plans.

Important Note #3: Many of you are rightly concerned about the potential tax bomb in life insurance that can accidentally be triggered by a careless policyowner when policy loans are present and net cash values are so low that the income tax on the gain on surrender (calculated using gross cash values less basis) is more – often significantly more – than the net cash surrender value.

This lurking tax bomb can be present in all forms of whole life and universal life where policy loans of any type are utilized. It can be avoided, and you, the producer, are key to making sure your clients are aware of how to sidestep it.

A tax bomb can be avoided if the policy is neither surrendered nor allowed to lapse, since the policy death benefit wipes away the income tax liability. The foundation of this special treatment is IRC Section 101. This statute provides that the proceeds of life insurance maturing as a death claim are exempt from federal income tax. This applies to the full death benefit, including any cash value component whether loans exist or not.

Can your clients remember these facts years into the future? If they are incapacitated, will family members understand the issues? It is probably best to file a short note with the policy – something like this (although your compliance officer will likely have preferred language):

If/when you take policy loans on this policy, be sure to talk to your financial adviser before surrendering or lapsing the policy in order to anticipate unexpected tax consequences that may otherwise be avoided.

Some life insurance companies have concierge units that monitor loan status at the point of lapse or surrender, and you would be well-advised to select an insurance company with this capacity. To be effective regarding the tax bomb, such carriers need to be proactive in their client relationships, not merely reactive to client inquiries. I hope that ultimately the policyholder service division of all life insurance companies will bring this potential liability to the attention of those surrendering or lapsing policies, particularly those policies with 50% or more of the gross cash value subject to outstanding loans.