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Term Life Insurance by Top
Rated Companies
More term companies
equals the best opportunity to obtain the lowest term quote!
Offering the Largest Selection of
Top-Rated Companies Instantly!
Why is this important?
Personalized
Tele-Application for All Companies, Right Over the
Phone!
For the serious shopper who would like a seasoned
professional to assist them-
"how term life insurance
works", "return of premium term life insurance",
"no exam term life insurance" and "what is term life
insurance" will be explained on this page.
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Return of Premium Life Insurance from AIG And Key Employees
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By Robert A. Miller, CLU, ChFC, MSFS
Director of Marketing I AIG Life Brokerage
One big problem with selling Key Employee coverage in small to
mid-size business is getting the owner to admit they have key
employees. Ask the owner and they will tell you the only key
employee is ME. Those people working for me are more trouble
than they are worth or something to that effect. So how do you
identify who's key in the business?
Some times you have to ask a different way. Give the owner a pen
and paper and ask him to write down the names of employees that
if they left to join his nearest competitor the company income
would decline by at least 10 percent. Or your expenses would go
up by at least 10 percent. These are your key employees. Now
look at the list, then hand it back to the owner and ask: "What
if they get hit by a bus tomorrow?"
"I have a program to help you with both the bus, and the
competitor. It's called key employee insurance." The bus is
easier to handle than the competitor, but we may be able to help
with both in one
deal.
The bus can be handled by term insurance that is owned by the
business so if something happens to a key employee it will
provide MONEY to the company that can be used to hire and train
a replacement. It's also extra cash to fall back on until that
new employee is really into the job.
But you can also use the insurance to provide a long-term
incentive for that key employee to stay with the company. In the
past this was done using cash value life insurance. But the cost
of the plan was such that it could only be used for high-end key
employees. Plus the guarantees were not so good, and there was
still an element of "trust me" in a plan using current cash
values. But now there is an alternative that is lower in cost
but higher in guarantees, so all key employees may be covered.
It's called Return of Premium term.
The company gets death benefit coverage for a key employee for a
period of 15, 20, or 30 years. The employer may design a plan
that at the end of that period the employee is paid a lump sum
bonus equal to the return of premium, if they stay with the
company. The company can't take a deduction for the premium paid
along the way, since the company gets the death benefit - tax
free - if the key employee dies, but they can get a deduction
for the bonus they pay at the end. Plus the insurance company
provides the money by way of the return of premium to pay the
bonus. The down side is the employee pays taxes on the bonus
when they get it. But the employer could take some of the
savings of their deduction and double bonus the employee, and
pay the tax for them. Remember we are talking 15, 20 or 30 years
from now, so who knows what the tax rates will be?
So the
company gets years of insurance protection, gives the employee a
bonus for staying all those years, takes a deduction for the
bonus, the money to pay the bonus is paid by the insurance
company - tax free - to the employer, and unless the employee
dies before the end of the period the money is guaranteed to be
there when needed, no matter what. A corporate resolution
awarding the bonus is recommended to help ensure this favorable
tax treatment. What's not to like?
However, we're not done. There are more options to this deal.
Instead of paying the bonus in cash the company could actually
"bonus" the ROP policy itself to the employee by changing the
ownership of the policy. From a tax standpoint the results are
the same. The company still gets the same deductions and the
employee still pays taxes on the ROP value. But the employee now
has options to keep the insurance in force on their life after
retirement and name their own beneficiaries.
Once the employee is the owner of the policy the
following
options
are available:
1. Take the ROP money and let the policy lapse.
2. Take the money but keep the policy at the A.R.T. rates - this
is if they are in really poor health and have limited life
expectancy.
3. An AIG American General exclusive - take a reduced paid up
life policy. Though technically a nonforfeiture option, that
negative can be a positive in the right circumstance. Amount is
guaranteed.
4. Convert all or part of the term coverage to a cash value
plan, maybe even on a single premium basis. Can use the ROP
money to pay future COIs in the new policy - use same money
twice!
All of these options at the end of the level period - when the
ROP is paid - are available to both business and individual
cases.
Related:
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