Piety and Perils of Low-Load

Katt, Peter C.
July 1993
Journal of Financial Planning;Jul93, Vol. 6 Issue 3, p104
Academic Journal
A sufficient number of life insurance companies have very substantial financial strength ratings, including four that offer low-load policies. There is no reason to recommend life policies, low-load or not, from companies with less than substantial financial strength ratings. Low-load life insurance policies have two distinct advantages. One, they drastically reduce the very large policy acquisition costs, which is calculated by discounting the difference between a low-load and full-load policies' illustrated fifth-year cash value. This kind of savings will either translate into lower premiums or higher values for the low-load policy. The other advantage, while subtle, is perhaps more important. If the planner removes any financial interest in the decision the client will make, the planner is rewarded for objectively is far more important than saying, yet being rewarded based on what a client decides. There are many companies with excellent financial-strength that have commission-paying policies that can be restructured to minimize the acquisition costs.


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