Advantages of No-Load Insurance

 Low-Load and No-Load Life Insurance.  There is some confusion about the difference between low-load and no-load. Actually, they are the same. The first product design used a universal life policy and was labeled no-load. Then came the introduction of variable life, and it had to be labeled as low-load due to the securities/investment components. Different label, same concept.

THE ADVANTAGES OF NO-LOAD/LOW-LOAD INSURANCE ARE:

• Most advantageous for client.
• Full Disclosure.
• Cost efficient death benefit.
• High liquidity beginning in the first year for asset accumulation.
• No surrender charges.
• Strips out agents high first year commission and renewal commissions.
• Minimal Loads (low).
• Increases client control of policy due to high liquidity.
• Expanded planning capabilities.
• Real tax advantages.
• Allows for the development of "Unique" strategies.
• Sustains advantages in "Full Cycle" planning.
• Creates planning opportunities for corporate clients.
• Removes the negatives usually associated with life insurance.
• Identifies the "Smoke & Mirrors" of traditional illustrations.
• Fee-based activity.
• Fees may be tax deductible / commissions are not.
• Much more effective than a "rebated" commission policy.

The design of the no-load life insurance product has created much more than a very cost effective policy. Flexibility is increased to benefit both the client and the planner. This flexibility relates to the spread between the maximum 7-pay premium limits (usually established to preserve all of the tax benefits of a life policy) and the minimum first year premium required to purchase the policy.

For example, for a 40 year old non-smoking male, the minimum first year premium required with a commission policy would have a range of $3,800 to $4,600 (general average), whereas the minimum for a no-load policy would have a range of $480 to $750 (general average).

When planning for asset accumulation, high first year values are very important. With the 40 year old male in the example above, a first year premium of $4,140, the first year surrender value of the commission policy would be $0, whereas the no-load policy would have $3,796. (If desired, the planner could design the premium so that the first year cash surrender value exceeded the premium, unless rated, giving the client maximum control of the policy.)

Another example would be a no-load survivorship (last-to-die) policy on a male age 65 and a female age 62, both non-smokers, death benefit of $2 million: minimum first year annual premium requirement is $369.

Such expanded flexibility not only gives the client maximum control of the policy, but also allows the planner maximum design capabilities, whether the objective be death benefit efficiency or asset accumulation.This design capacity allows for strategies that fully realize the clients objectives,and concepts that have not been seen in the market. One example in the business planning area is that of split-dollar. Although many corporations have instituted this strategy for their executives (or company owners),few are aware, including their advisors,that the executive/owner is personally liable for the obligation that is represented by the spread between the cumulative corporate outlay of premiums and the surrender value of the contract. The use of a properly designed no-load life product can eliminate this liability by providing first year cash value liquidity that exceeds the premium paid.

Also, in the corporate environment, there would be no "hit" to earnings with COLI, key person, buy and sell, split dollar, etc.

Contact the Network at 1-888-954-0931 for more insight on this dynamic planning tool, or contact one of the preferred members at the Links to Referred Advisors section of the home page.