A Life Insurance Strategy that Delivers “Better than Market” Performance – Stepped Premium Design
Designing life insurance strategies that deliver “better than market” performance is as much an art as it is a science. This design uses both elements, with a funding approach that can deliver higher IRR’s than typical “vanilla” designs with the flexibility to reflect your client’s specific cash flow requirements.
The science behind the strategy is fairly straightforward: Identifying products with a cost structure that allows for an initial funding level far below normal level pay designs. The art is in designing the rest of the funding pattern: How much additional cash will the client need to commit and when can, within certain parameters, reflect things like expected increases in income, the receipt of an inheritance and more.
The result? Something that looks a lot like this ledger, with an internal rate of return that outpaces traditional designs and freed up cash flow for the client to allocate elsewhere in the early years. It doesn’t hurt that this product offers a rolling target, so full compensation is only delayed rather than the advisor having to take a pay cut.
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