Key Trends in Life Insurance and Annuities – What You and Your Clients Need to Know- 2 Min read

Quick update on recent trends in the life insurance and annuity marketplace that may benefit your clients' portfolios and keep your offerings current:

1. RMDs and Legacy Maximization

Do you have clients who don’t need to use RMDs for their lifestyle? Using IRA RMDs to fund life insurance can significantly increase the legacy left to heirs. For clients with both “live on” and “leave on” assets, maximizing tax efficiency and legacy through IRA Max strategies is key. The three common approaches are:

   - Legacy Enhancement

   - Tax Elimination

   - Tax Offset

   For insurable clients with IRA “leave on” assets, I'd love to show you how this strategy could potentially more than double their wealth transfer. Keep in mind rates are currently at all-time highs, and insurability becomes more challenging as clients age.

2. Long-Term Care - Avoid Unnecessary Taxation

Annuities with LTC riders allow clients to 1035 exchange existing annuities with large taxable gains into a fixed-rate annuity with long-term care (LTC) benefits, maximizing LTC funding through the Pension Protection Act (PPA). Unlike traditional annuities, which incur taxes on growth when used for LTC, these strategies enable tax-free LTC withdrawals. For example, a $200,000 annuity can be optimized to provide up to $600,000 in LTC benefits, tripling the original investment and offering substantial, tax-efficient coverage for future care needs. Underwriting is also limited to a simple 10-minute questionnaire—no labs or unnecessary complexity. (See attached "Global PPA ForeCare" flyer.)

3. Joint LTC - Spread the Risk & Cost Between 2 Insureds  

Nationwide’s CareMatters Together is a linked-benefit long-term care (LTC) policy designed for two people, usually spouses or domestic partners, providing flexible LTC coverage and a death benefit. A standout feature is the ability to spread costs across two lives, making it more affordable than two individual policies. With shared benefits, couples can access a combined pool of LTC funds, which can be especially beneficial if one partner needs care while the other doesn’t, maximizing value and flexibility. CareMatters Together is expected to be available in California soon, expanding options for couples seeking joint LTC solutions in a state where options are limited.

4. Clients with Large Loans Outstanding on Their Life Insurance Policies? 

Using a 1035 exchange to replace life insurance policies with large outstanding loans can protect clients from costly premium outlays, potential policy lapse, and unwanted taxation. This strategy reduces the interest rate on the loan by transferring the policy to a carrier with favorable rates. Clients can eliminate or reduce loan balances without paying out-of-pocket, preserving their coverage and avoiding the tax consequences of a policy lapse, which would trigger income taxes on the outstanding loan balance above their cost basis. Offer your clients financial relief and peace of mind by helping them maintain their life insurance in a more secure, sustainable way.

5. The Importance of Periodic Contract Audits and Reviews 

Regular audits of life insurance and annuity contracts can help ensure clients are in the best-performing products and taking advantage of market improvements. Reviewing current contracts allows us to identify opportunities to bolster your clients' insurance positions through enhanced benefits or lower costs aligned with today’s higher interest rates and updated needs. We often see firms that lack the time, tools, or capacity to conduct reviews at scale—prevent your firm from falling behind.

Every client deserves a white-glove insurance experience. Feel free to reach out via my contact information below or use my "Schedule an Appt" link for a brief conversation on how our expertise can support your goals and bolster your capabilities. I’d love the opportunity to be your trusted, go-to insurance resource.