Even though the stock market remains volatile and has lost some luster in recent months, variable universal life sales continue to grow steadily. Sales in the year 2000 easily outpaced 1999s sales, measured by new policies written, sales volume and total premium.
If producers are properly licensed to sell variable universal life products, they can participate in this growth and increase their income substantially. According to industry statistics, and supported by our own at Columbus Life, the average variable life premium exceeds the average fixed universal life policy premium by better than 30%.
To capitalize upon the variable universal life trend, producers should recognize that VUL buyers are sophisticated, upwardly mobile or affluent, already investing, often below the age of 55, and need life insurance protection to solve a host of personal, business or wealth transfer objectives.
Distinct Segments
Roughly based on age and life stage, three distinct groups of VUL buyers may be targeted: wealth builders, ages 35-55; pre-retirees, ages 56-66; and seniors, ages 67 plus.
Buyers between ages 35 and 55 with discretionary funds and a large need for insurance protection to meet family obligations demonstrate the highest tolerance for risk, for three reasons:
1. Due to job mobility, they rely less on their employers for their financial security; thus, they are saving and investing on their own.
2. They maintain a healthy skepticism about whether Social Security will benefit them upon their retirement.
3. They have a fairly long time horizon for wealth accumulation; thus, they can accept more risk in hopes of greater return.
On the other hand, pre-retirees ages 56-66 tend to be focusing on reducing debt and accelerating wealth accumulation to meet their individual retirement dreams and goals of financial security. While discretionary funds to invest may be greater than younger buyers, due to a shorter time horizon, pre-retirees generally prefer a less risky allocation of assets in their investment sub-account choices; in other words, they may express more aversion to potential loss.
Seniors, or the mature market, tend to be divided into four groups, largely measured by economic status: 1) fixed-income seniors; 2) still-working seniors; 3) comfortable seniors; and 4) affluent seniors. Many are still accumulating wealth and need additional life insurance protection. Their wealth accumulation and transfer objectives are varied, but may include estate liquidity for settlement costs, passing a business interest or equalizing estate shares; leaving bequests to family members outright or in trust; or endowing schools, churches or other charities.
One dominant reason seniors purchase variable universal life is to tax shelter their currently taxed investments–or reallocate their asset mix–during accumulation and upon distribution. The tax-deferred accumulation, tax-favored withdrawals or loans, and the income-tax-free death benefits of life insurance are attractive.
Service Clients Now!
It cannot be emphasized enough, however, that variable universal life isnt for every life insurance prospect. Furthermore, at this time, owners of variable life products may be understandably nervous about the erratic equities market. Such clients will benefit from a producers valued advice on asset allocation strategies and options.
Thus, this is an excellent time for producers to call on all clients owning VUL to update their policy. Clients should be questioned about their objectives and comfort level with the risk and returns of their current investment subaccount choices.
