When was the last time you wanted to reach out into the business market with a new sales idea? We have all worked through the process of “funding” buy/sell plans and as soon as the agreement is drafted we typically have sold a term policy to complete the process. I would argue that this is a disservice we have all brought over the years. There are a number of other moving parts to consider when making sure that the agreement plan is fully funded and you can help differentiate yourself with the advisor and attorney/accountant by bringing the full package to bear. The part we don’t usually focus on is what if all parties live to the time the buy/sell transaction has to occur?
Most business transfers actually don’t include a death, but rather some other reason for an owner to leave. As anyone who has read one of my articles knows, I am a big proponent of VUL solutions and believe they should be part of the solutions offered even if the ultimate sale is not variable. However, the solution presented needs to be simple enough that it can be explained to all parties in such a way that they don’t need to be experts. Many businesses are growing rapidly and the funding products for those types of firms need to have the ability to grow in value as the business grows. VUL is the solution that can best create cash value appreciation at a high enough rate to keep up with rapidly growing value. If the owners are able to agree on the valuation method to be used at separation, it is easy to tailor the products to satisfy that need. A number of carriers offer an advanced market or business advisers software program to help you get to a solution that can be agreed upon by the attorney and/or accountant.
The important part to know with a VUL sale, in these cases, is that the sub accounts in the product need to be matched to the need in order to create the potential to reach these goals. A no-lapse guarantee product is no better than straight term unless you are sure the buy/sell transaction will be triggered by a death—such as a parent-child transfer where they agree that the parent is going to be an owner until death. Also, if the company has a slower growth horizon, an IUL product may be as good as or better than VUL to satisfy both appreciation death benefit needs.
Other conditions that will differentiate you from the average advisor are disability and critical illness. Both represent significant issues, particularly for a professional organization where the owners are generating billable hours. If one of the owners is disabled or contracts one of the critical illnesses, they will expect to continue to be paid even though they may not be able to generate any revenue for the firm. These issues have the potential to be more financially crippling for a company than the death of an owner. These coverages can be added as a rider or a separate policy sale for each of the owners to help cover these needs.
If the only solution you can bring to the table for these opportunities is limited to a 20 or 30 year level term, you are going to miss chances to look better than the cheapest solution and create relationships that will lead to future successes.