Overcoming Life Insurance Policy and Plan Challenges

Insurance Life Insurance

Business owners and high-income earners often need financial services well-beyond those offered by the employer’s group insurance plan.  For example, most group life insurance plans include a maximum death benefit that does not fully protect the assets of the highest earners.

Key Executive Policies, Buy-Sell Agreements and other Non-Qualified Executive Benefits are examples of policies that:

  • Protect the financial assets of the individual and business,
  • Accumulate a cash value that can grow over time on a favorable basis, and
  • Minimize tax liability and maximize income potential.

Summit was recently brought in as an advisor for a middle-aged business owner facing these challenges. While great financial success had allowed this client to grow and prosper, it also created new challenges. As the business and business owner’s income grew, he became increasing aware of the need for a tax-advantaged way to accumulate funds for retirement. The business owner’s CPA, recognizing a need for financial expertise, brought in Summit for a full review of the owner’s benefit and investment policies.

Summit’s Solution

The client shared personal goals consistent with most high-income earners: save money for retirement in a safe investment plan, provide life insurance coverage for his family, and reduce his current income tax liability.

Summit designed a solution to meet this business owner’s goals by establishing both qualified and non-qualified retirement plans.

The non-qualified plan was funded with customized life insurance specifically designed to accumulate cash value on a tax-favored basis. This policy would also provide for the business owner’s family with an income tax-free death benefit in the event of his pre-retirement death.

Next, the head of Summit’s Pension Administration division was brought in to design qualified plans, allowing the business owner to defer and accumulate as much income as possible on a pre-tax basis.  A defined contribution, 401(k) plan and a defined benefit pension plan were combined to allow the client the maximum tax-deductible contribution.

By implementing these recommendations, this client has become uniquely positioned to accomplish his goals.

  • The Non-Qualified plan allows the client to accumulate retirement funds on a tax-favored and secure basis, and at the same time, provide for his family with an income tax-free, pre-retirement life insurance benefit.
  • The two Qualified Plans provide for substantial immediate income tax savings while accumulating large sums for his future retirement.

Beyond the instant financial savings from implementing these plans, the business owner gained a renewed confidence in his financial future and a personal sense of reassurance from his investment advisors. Future reviews of his plan will ensure the plan continues to fit his financial needs as personal circumstances and the investment landscape continues to evolve.

Rick Christy

Senior Vice President- Individual Insurance Services


These results are for illustrative purposes only and should not be deemed a representation of future results. Circumstances, solutions, and/or results are based on specific facts tied to unique client situations. Favorable results cannot be guaranteed even in a similar scenario. Each specific set of circumstances will differ depending on client needs and profile. Actual results may be more or less than those shown. Past performance does not guarantee future results. This assessment is that of the writer, and not the recommendations or responsibility of Cetera Advisor Networks LLC or its representatives. The solutions presented in this scenario are being offered through Summit.

Rick Christy is not affiliated with Cetera Advisor Networks LLC.