MDRT Minute

MDRT Minute: Breathing New Life Into Businesses With Life Insurance

The following is a monthly series of sales tips articles brought to you by MDRT.

The death benefits we sell are extremely important. However, we sometimes forget about the living benefits life insurance provides. They, too, are there for clients when needed. Two experiences stick out in my mind:

Whole life insurance
In the early 1990s, a mentor from my early years retired and assigned his book of business to me. One of the clients was a successful business owner who had purchased a $1 million whole life policy in 1984.

I began building a relationship with Bob in 1994, calling on him to review his policy and provide him with my financial planning advice on a fee basis. We developed a great relationship; little business was sold, but I continued to call on him. In 1999, two positive things happened:

First, the company issuing Bob’s $1 million policy demutualized, resulting in 6,887 shares of company stock, a value of more than $90,000 to Bob, combined with a one-time extra dividend of about $20,000.

Second, I made my first sale while working with Bob and his attorney on estate planning. At that time, Bob purchased a $2.5 million second-to-die policy for estate liquidity purposes.

In 2001, Bob’s business was severely impacted by the economic downturn. I reminded him that he had more than $250,000 of cash value in the original life insurance policy. He asked, “How quickly can I get the money?” We got a check to him in a week, and the infusion of cash literally helped save his business.

Since then, Bob has purchased an additional $1.1 million in personal insurance and another $1.5 million second-to-die policy. Today, I am a key individual in his circle of advisors.

Key person insurance
In 1994, I called on the owner of a trucking firm. Two years prior to my call, Jim had been diagnosed with a malignant brain tumor. While treatment was successful, he did not qualify for traditional life insurance.

The good news was that two of Jim’s sons — Pat and John — worked in the business as his successors. I introduced Jim to an estate planning attorney, and Jim purchased $1 million in key person insurance for both of his sons, and a $2.5 million second-to-die policy on him and his wife.

Sadly, Jim died in 2000 after his brain tumor reappeared. Fortunately, Jim’s estate planning had been completed, and Pat and John began purchasing the company from their mother via an installment sale that had been established as part of Jim’s plan.

In 2001, Pat and John’s business was affected by the recession. I reminded them that $145,000 in cash was available in each of the key person policies their father purchased. They had their checks within two weeks, and the money helped stave off bankruptcy for a 40-year-old company with a staff of 75.

Working with these clients has emphasized that when it comes to life insurance, someone does not always have to die for careful planning to pay off.

Wayne D. Minich, CLU, ChFC, is a 34-year MDRT member with 12 Court of the Table and two Top of the Table qualifications. He has served on several MDRT committees and task forces and has spoken at two Annual Meetings.