1. Keep the loan duration short term
Ideally five years or less, with the objective to pay off the loan within 20 years at most.
2. Interest should be paid annually
If interest is accrued, additional back testing should be performed to identify points of failure.
3. Develop an exit strategy at the outset
4. Use Long-term high cash value policies
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
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
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
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
Doing so will help ensure that all parties to the planning were aware of the risks at the time of the transaction.