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Insurance Basics for Medical Professionals
By By Jeffrey H. Rattiner, CPA, CFP®, MBA
After determining the need for insurance and the amount to purchase, the doctor-client and financial planner’s next task is to match those needs to the client’s objectives to determine what type of policy the client should purchase. The life insurance industry features more products today than ever before. One reason for this change is that, clearly, the insurance industry has expanded its product base to become more competitive. Another reason is that clients’ needs are constantly changing and the insurance companies must keep up with those needs or run the risk of having funds withdrawn from their companies. New and different types of life insurance products are here to stay. Since life insurance represents a significant part of a doctor-client’s risk-management program, planners have to be versed in the specifics of the varied product base.
Definition
Universal variable life insurance is a hybrid of universal life and variable life insurance. It lets policyholders adjust premiums and reconfigure the death benefit level. The cost of this increased flexibility depends on the equities that are invested.
Similarity to Variable Life Insurance
Similar to the variable life contract, the policyholder gets to choose the investment medium under this contract, with no guaranteed cash value levels or growth. Policyowners are given the choice of option A death benefits (face amount only) or option B death benefits (face amount plus cash value). Because of the daily changes in cash value, however, option B is often not available. Premiums and death benefits are flexible and not guaranteed.
Assessment
Universal variable life policies are most appropriate for people with changing financial needs or long-term needs and for those who are willing to give up all guarantees in exchange for policy and investment flexibility.
Conclusion
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Filed under: Experts Invited, Insurance Matters, Risk Management | Tagged: Jeffrey H. Rattiner, Universal Variable Life Insurance, variable life insurance |
The Leading Business Education Network for Doctors, Financial Advisors and Health Industry Consultants 
DON‘T BE ABUSED BY UNIVERSAL LIFE INSURANCE ILLUSTRATIONS
While it may not come as too much of a surprise, a study more than a decade ago has shown that the historical accuracy of universal life illustrations has been quite poor. Most insurance professionals [sic] are aware that illustrations have the potential for abuse.
In fact, renowned insurance expert Joseph M. Belth stated that it is deceptive to focus on a gross interest rate while either minimizing or ignoring expense charges. Belth recommended using net rates of return. And, Roger L. Blease of A.M. Best believed that the 10-, 20-, or 30-year projected cash values and face amounts “will never happen.”
Tools to Counteract the Abuse
This problem has not been ignored by the insurance industry and regulators, both of which have taken steps to address illustration-related issues. The American Society of CLU & ChFC has developed an Illustrations Questionnaire (IQ) and the National Association of Insurance Commissioners (NAIC) has put together a Life Insurance Illustration Model Regulation.
Several parties stand to suffer from consistently inaccurate illustrations—insurance [sales] professionals are exposed to liability, policy-owners may fail to reach their goals or seek other means, the industry loses credibility, and regulators may overreact with inappropriate laws.
The study’s findings: Effective analyses by purchasers and insurance professionals may include illustrations but could be facilitated with use of more information at the initial sale, by periodic reviews, and an explanatory prospectus.
Note: “Illustrated Versus Actual Universal Life Insurance Cash Values,” by James Carson, Mark Forster, and Jeff Forster, Journal of the American Society of CLU & ChFC, May 1997, pp. 60–65, American Society of CLU & ChFC, [610] 526-2500)
So, doctor colleagues beware!
Dr. David Edward Marcinko; MBA CMP™
http://www.CertifiedMedicalPlanner.com
[Publisher-in-Chief]
Retired Insurance Agent
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