Life insurance has been a challenging financial product to manage in the last year or so and we have written often about the issues that surround this asset. But we also believe that this is a powerful financial tool. In our last blog entry we wrote about its use to mitigate the negative effect of a tax law change that may occur in 2017. At ITM TwentyFirst, we manage life insurance, we do not sell it. In fact, we are one of the few firms that manages life insurance without earning any compensation from sales. We show our support not just by managing in-force business as efficiently as possible for trustees, grantors, and especially beneficiaries nationwide, but also by pointing out the value of life insurance as a tool to efficiently leverage assets for the next generation, especially in a trust setting. We believe strongly that life insurance, when selected properly and managed efficiently, can be one of the most important assets a person owns.
In the past year we have witnessed a number of transactions in the life insurance industry. One of the largest was the sale last year of Hartford Financial Services Group, Inc.’s individual life insurance business to Prudential Life. That deal was a win/win/win. The transaction allowed Hartford to free up capital it felt could be better used in other areas. Prudential expanded its business line in a business it wants to be in. And the consumer won because the Hartford business and service has moved rather seamlessly over to Prudential. In fact, the Hartford name still exists in the marketplace, backed by Prudential, and is a very “competitive” product.
Guaranteed Universal Life (GTD UL) policies have been a mainstay in the TOLI world, providing lifetime “guaranteed” coverage for a very cost efficient premium. As our earlier Blog (Happy New Year……The Cost of (Some) Life Insurance Just Went Up) pointed out, GTD UL’s do not provide significant cash value, but in the TOLI world where low cost death benefit is important, they fit the bill.
In the last decade, one of the most popular life insurance products has been the no-lapse guarantee universal life policy (note: for a white paper that explains the different types of life insurance go to http://www.youritm.com/Sites/17/docs/WP_MikeBrohawn.pdf). With its low cost, guaranteed death benefit coverage over the lifetime of the grantor/insured, this product was tailor made for the TOLI market where the focus is usually on death benefit, not cash value. Because of this focus, the fact that these policies did not generate significant cash value was irrelevant for most people, and the death benefit guarantees made them very attractive, delivering the most bang for the buck.