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Five Impactful Life Insurance Strategies and Insights for Financial Advisors

Many misconceptions surround life insurance — by clients, financial advisors, and agents alike.

Financial advisors can help communicate the versatility of life insurance to their clients and help them understand there’s more value to this protection than just a death benefit.

In a recent episode of The Bucket Plan On-Demand podcast, host Dave Alison, CFP®, EA, BPC, President and Founding Partner of C2P, and CEO of Alison Wealth Management, went so far as to describe life insurance as being one of the most “misunderstood assets by clients, mismanaged products by wealth managers, and mis-sold products by agents.”

This same podcast also featured insurance expertise from Stoyan Petev, CFA, CFP®, CLU, ChFc, Senior VP of Advanced Markets at C2P, and Walter Young, MBA RICP, Business Development Officer and financial representative at JL Smith Holistic Wealth Management. The two described how financial advisors can improve the conversations around life insurance with their clients to cut through those “Three M’s” that may be preventing them from taking advantage of the numerous benefits it has to offer.

Learn how to harness the full potential of life insurance with 5 effective strategies and insights from this podcast.

1. Understanding Life Insurance as an Asset

Foremost, Petev emphasizes the importance of viewing life insurance beyond its traditional perception. He argues that “life insurance is an asset” and should be considered as such on the client’s balance sheet, whether for personal or business use.

This perspective is pivotal in recognizing the immediate wealth effect a term insurance policy can create for loved ones or the strategic advantage of using cash-value life insurance as a bond alternative in one’s portfolio.

2. Real-Life Applications and Benefits

Many practical applications of life insurance are noted in the same podcast. 

For instance, Petev recounted utilizing his policy’s cash value to finance a car purchase amid soaring market rates, demonstrating how life insurance can even serve as a private line of credit.

Such stories underline the tangible benefits life insurance offers beyond death benefits, including serving as an emergency fund or investment buffer.

3. Simplifying Complex Concepts

Walter Young shared his “Desert Island Dilemma” parable from his book, The 5th Option: Why Your Retirement Plan Won’t Work the Way You Think It Will, to show how using scenarios or stories like this can be a powerful tool for simplifying the complex nature of life insurance and retirement planning.

Imagine you are stranded on a desert island, and you only have one finite source of water. You don’t know how long it will last you and when or if you will find another source to replenish it. What would you do in this situation?

Most people would use as little of the water for as long as possible so they avoid depleting the source for survival. This analogy helps clients grasp why planning for the unknowable — how long they’ll live and how markets will perform — is key.

4. The Love and Greed Policies

A fascinating takeaway from the podcast is the distinction between “love” and “greed” policies.

This concept, introduced by financial advisor, Dave Buckwald, and shared by Stoyan Petev categorizes policies based on their intent: either maximizing death benefits for loved ones (“love”) or optimizing living benefits for oneself (“greed”). This framing helps clients understand the dual nature of life insurance and its role in holistic financial planning.

5. Addressing Misconceptions and Optimizing Policies

The episode didn’t shy away from addressing common pitfalls in life insurance planning, such as the allure of complex indices in Indexed Universal Life (IUL) policies.

Petev’s technical knowledge clarified how conservative illustrations and proactive policy management can help ensure that advisors can navigate the evolving insurance landscape effectively.

Helping Clients Understand the Critical Role of Life Insurance

Life insurance, when utilized thoughtfully, can offer clients a unique blend of security, flexibility, and potential growth. By viewing life insurance as an asset, simplifying complex concepts, and understanding the strategic use of different policy types, advisors can better serve their clients’ diverse needs.

This article only scratches the surface of financial advising insights related to life insurance. If you’re a financial advisor seeking to refine your approach to life insurance and holistic financial planning, we encourage you to listen to the full podcast episode for a deeper understanding and practical strategies to implement in your practice.

To access additional materials provided by C2P, schedule a call, and keep yourself updated with the latest industry trends and insights by subscribing to the C2P podcasts.

For Financial Professional Use Only

The information provided in this presentation is not intended as investment advice or legal advice. The information provided is for informational and training purposes only. The information in this presentation was accurate as of the time the material was created. Tax laws and rulings can frequently change. Please discuss the client’s current situation with an accountant or tax advisor.