1. Keep the loan duration short term
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Ideally five years or less, with the objective to pay off the loan within 20 years at most.
2. Interest should be paid annually
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If interest is accrued, additional back testing should be performed to identify points of failure.
3. Develop an exit strategy at the outset
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4. Use Long-term high cash value policies
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IUL and possibly whole life are generally preferred, although GUL may be a possible alternative if a client’s retained assets have historically performed well.
5. Beware of early high cash value riders
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If such a rider is used, provide the client an example without the use of the rider so the client understands the rider’s long-term cost.
6. Factor in Death Benefits
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Include increasing death benefit options or a return of premium death benefit rider as part of the comparative analysis.
7. Provide full transparency from the beginning
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Do not omit bad and worst-case scenario options through the use of an Excel sheet sales model.
8. Have clients and counsel initial and sign every page
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Doing so will help ensure that all parties to the planning were aware of the risks at the time of the transaction.
