Talking Points for Insurance Advisors

Below are four talking points that agents should have “top-of-mind” as they discuss this topic with clients, trustees, bank trust departments, and the children of elderly parents managing their trusts looking for estate planning options:

1. Provide historical background information: Explain to your clients and referral sources that many older universal life policies were purchased “back in the day” when interest rates were substantially higher and the anticipated dividends were intended to fund future premium payments. Given the current interest rate environment, many of these TOLI policies may be on the verge of lapse.

2. Become a trusted resource to other professionals: Grantors often appoint trustees who are family members or friends with no formal training as it relates to reviewing policy illustrations or managing investments. Agents should consider inviting an estate planning attorney or CPA to lunch to discuss the challenges of having their clients appoint family members, as trustees, when it involves overseeing trust-owned life insurance.

3. Reference Statistics: According to an article published earlier this year by LifeHealthPro, it is estimated that 90 percent of in-force trust-owned life insurance policies are administered by amateur trustees. And furthermore, approximately 38 percent of in-force flexible premium non-guaranteed death benefit TOLI policies are illustrated to lapse prior to the insured’s life expectancy.

4. Offer guidance and options. Inform your clients, attorneys, and CPAs that a hybrid of life settlement non-tradiioanal premium financing is often a viable solution for TOLI policies on the verge of lapse. Explain that in some cases, the trust makers may choose a life settlement for the underperforming policy and then use the proceeds from the life settlement toward replacement coverage with a better-performing product. Or that proceeds can be used towards rising long term care and nursing home costs.