Financial Pros Often Downplay Life Policy Investment Features: Survey

The policy builds cash value over time, and the policyholder can use the cash value to buy future life insurance premium. The policyholder may also be able to use tax-free policy loans or other strategies to tap the cash value.

If the policyholder fails to pay back policy loans before the insured dies, the insurer deducts the amount owed from the death benefits.

Law firms court consumers with warnings about what can happen when policyholders take out policy loans or use the policy cash value in other ways without fully understanding the implications.

Kurta Law, for example, notes that tax benefits may disappear if a variable universal life policy lapses, and the lapse of a VUL policy may saddle clients with big tax bills.

The Discussions

Today, financial professionals may be shying away from mentioning the ways clients can use life policies while the clients are still alive: Ernst & Young and LIMRA report that only 34% of the financial professionals included in their survey often talk about policy loan provisions during life insurance discussions.

Ten percent of the financial professionals never mention cash-value withdrawals, and 18% never mention policy loan provisions.

Financial professionals also downplay some other product features: 62% of the financial professionals said they do not talk about tax-deferred account value growth or the financial strength of insurers very often.

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