How to Grow Your Insurance Book with CSV Lines of Credit?

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Sure-fire opportunities

When clients undergo significant life events, their need for insurance coverage often grows accordingly. Marriage, home ownership, parenthood – any number of transitions could drive them to seek extra protection, and the result is an interesting opportunity for advisors as well.

Using a niche lending solution known as a CSV Line of Credit (‘Cash Surrender Value’), advisors can create strategies that enable their clients to buy the protection they need without a major outlay. (Interest payments only.)

Imagine that your client has contributed to a whole life policy for several years. Through steady premium payments, the CSV in the policy may have grown into a tidy sum, but the real reason for holding the policy would still be the death benefit – which is significantly larger and would be advanced to the beneficiaries in event that the insured party passes away. As the client’s circumstances shift, and the initial amount may no longer be sufficient to protect their loved ones, they could feel compelled to increase the total payout for greater peace of mind.

The only constraint is cost. An expansion in coverage requires higher premiums, driving up expenses at the exact moment when the client may want to tighten their belt. This is where a CSV line of credit becomes useful; it enables your clients to leverage their existing policy’s cash value, and the proceeds can be used to purchase more insurance, thereby giving them the assurance that their loved ones will be cared for, even if the worst should occur.

Delivering extra coverage – and value

Equitable Bank partners with many of Canada’s leading life insurance carriers to offer an innovative solution where the whole life policy serves as collateral for a loan. Based on a simple, hassle-free underwriting process, the policy is assigned to Equitable Bank as collateral, enabling us to advance credit directly to the policy holder while you, the Advisor, provide critical support and guidance. There are no formal applications or transaction fees, no impact on the client’s borrowing capacity, and the money available through the line of credit is tax-free.¹

Unlike other lending solutions, the loan is secured against the policy alone, requiring no other collateral in order to be granted. It’s also important to remember that the facility is a revolving credit facility, so borrowed amounts can be repaid and made available later if circumstances change. That said, clients do not have to make any principal payments while the LOC is in good standing.² When used to purchase additional life insurance, this would have the net effect of increasing their death benefit with the only cost being the monthly interest payments.

Moreover, the policy’s value continues to grow after the loan is created. So, when the policy holder eventually passes, the outstanding amount of the loan is repaid from the death benefit, with the remaining amount going to the beneficiaries.

Of the two products within our CSV suite, the Equitable Bank CSV MAX Line of Credit is ideally suited for younger clients beginning a new phase of life. Whether they’re growing their family, getting married or buying real estate, you can deliver an innovative approach to broaden their coverage. It’s a win-win scenario, where you can ensure clients receive maximum protection for their loved ones and enjoy the added bonus of growing your book.

Who’s eligible?

Canadian residents who are the age of majority and have:

• A whole life insurance policy with one of Equitable Bank’s insurance partners
• Adequate cash surrender value available in their policy
• Met financial qualifications to ensure interest payments can be made

Ready to apply? Get in touch with your financial advisor or insurance broker today to discuss how you can balance coverage and cash-on-hand.

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Need more information?

Contact Mike Pilz, Head, National Sales, CSV Lending at mpilz@eqbank.ca and 647-600-7559, or email our team at wealthsolutions@eqbank.ca.

¹ Each borrower has unique tax situations which may impact the tax-free benefits of an Equitable Bank CSV Line of Credit. ² The Equitable Bank CSV Line of Credit Suite is a demand credit facility, meaning Equitable Bank can demand payment of all or part of the outstanding balance at any time. The outstanding balance of your loan must remain below 95% of the cash surrender value of your policy.