When Cost Recovery Is The Issue, Consider Using No-Load UL
In a recent presentation to a local Estate Planning Counsel, a Tampa trusts and estate planning lawyer warned of "Life Insurance Time Bombs." His cautionary words spoke of policies affected by economic changes, legislative influences and contractual limitations.
These words fueled the fires of skepticism already burning in the psyche of many attending gatekeepers.
Fortunately, even though it is impossible to guard against legislative influences and most economic changes, it is possible to avoid certain contractual "Time Bombs." I am referring here to taking a no-load approach to executive benefit life insurance plans.
Lets see how that can work. Producers often confront certain common objections to using life insurance as a funding vehicle for executive benefit plans. These objections include fixed premium requirements, pre- and post-retirement cost recovery, and contractual penalties.
In this market, CPAs and chief financial officers focus not only on the after-tax costs of benefit plans, but also the actual (not projected) cash-flow demands as the benefit plan matures.
Now, an employer may be interested in sponsoring an executive benefit plan and in committing to a projected annual expense. The problem is, there may be periods of time when funding the plan is not convenient. This is where a no-load (or an aggressively blended) universal life policy can help.
Consider: If the UL policy allows suspension of premium payments during lean years, as many do, that feature may persuade the decision-makers to proceed confidently with implementing a benefit plan.
Furthermore, if the UL policy is absent of surrender charges, this assures the benefit plan sponsor (employer) that the plan may be terminated at any time for any reason with little or no financial penalty. And that enables you to defuse a significant potential "time bomb"–namely, the hold on money that would have occurred had there been a surrender charge.
