Policy illustrations for participating whole life insurance (par) can be a powerful sales tool. They help show how the product works and demonstrate its potential. What they don’t do, however, is give clients clear insight into the company behind the product. And when it comes to par, that insight could be an important part of the decision-making process.
The complete story
“The illustration is only part of the conversation,” says Dean Chambers, Sun Life Financial’s Vice-President of Individual Insurance. The complete story includes talking about the company’s history and management of its par account:
- Will the company be around for the long-term to pay claims?
- How well does it manage its par account?
- What does its par history look like?
- Does it have a solid and skilled management team behind its par account?
- Is the potential client comfortable with the company’s investment approach and underwriting philosophy for the participating block?
“The investment approach will create investment earnings distributed through dividends. The underwriting philosophy will drive mortality gains that will be passed through the dividends,” he explains.
Chambers also cites ‘investment mix’ as a worthwhile discussion, noting that:
- participating accounts are primarily managed as a fixed income fund, and
- it’s important to have a strong mix of government and corporate bonds, mortgages and private fixed income securities.
And while the amount of participating surplus can also be a consideration for clients, surplus levels will always fluctuate. “This is expected and happens across companies and shouldn’t be perceived as a negative,” says Chambers.
The bottom line
It all boils down to doing business with a company that has strong par history, a diversified investment mix and responsible, well-managed underwriting.
“Rethink your approach to par,” Chambers advises. “Share a complete story that includes other, equally important, considerations that go beyond the illustration.”
Participating whole life insurance (par) provides a combination of:
- permanent life insurance (whole life insurance) protection, and
- an opportunity for tax-preferred cash value growth.
The base insurance protection is guaranteed for life, as long as clients pay the premiums when they’re due. Par policies are also eligible to receive dividends, which clients can use to buy additional coverage or reduce their annual premium. They can also be left on deposit to earn interest or taken in cash. Par can be an excellent solution for clients interested in:
- lifetime protection combined with the opportunity for significant savings,
- innovative ways to save for retirement or to more effectively meet their estate planning needs, and
- increasing their death benefit over time to keep pace with inflation.
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