Searching for the right cure

by John R. Martin, CLU Vice President, Life Sales

Given the volatile and constantly changing business environment today, entrepreneurs and owners are faced with finding ways of growing their business while protecting it at the same time. Life insurance can offer companies a way to cover their key executives, provide cash value and ensure a viable succession plan is in place for future generations. However, not all policies are created equal. An agent's job of finding just the right solution for a medical practice's unique need was as important as the practice's need for finding the right cure for their patients' ailments.

The facts

• Long-standing client, male, age 64
• Part owner of a profitable multi-location medical practice
• 180 employees, 23 physician owners and one group business manager
• Needing $900,000 in assets to buy out physician owners upon retirement and/or death

The goal

Create a scenario that would provide the medical practice with enough available funds to execute the buy and sell agreement drafted among the owners. With this accomplished, the physicians could fulfill their overall business continuation plan.

The course of action

The client had spent his life working to build a successful, profitable medical practice. Over time, a number of additional doctors had bought into the practice and expanded it into a multi-location organization. With the owners aging, the client knew it was important to develop a business continuation plan to maintain success through transition as current owners began to retire or pass on. He and his co-owners sat down with the group's business manager to define the best course of action. They wrote a buy and sell agreement and determined they needed to find a way to fund a buy-out plan upon each owner's retirement or death.

The client asked his agent to begin working closely with the practice's business manager to drum up possible options for securing life insurance that would cover their comprehensive needs. With the business manager confident that term insurance would be the answer, the agent decided to elicit the help of his Life Sales Consultant, Bob Ernst, for a better solution. They knew that the practice would need to look into either Simplified or Guaranteed Issue for covering so many lives but needed to find which cash value life insurance could fund the buy and sell agreement and keep the practice moving forward. They also knew that cash value life insurance could create a sinking fund to provide cash to the practice to purchase a doctor's interest at his retirement.

The solution

After reviewing a number of carriers' offerings, Bob determined that Aviva had the answer the client was looking for. Aviva's Guaranteed Issue Program offered a greater death benefit on a guaranteed issue basis based on the number of lives that would need to be covered in this particular situation. Although the practice's business manager thought term insurance would be the answer, its inability to cover all physician owners due to existing medical conditions and/or age required a different solution.

The Guaranteed Issue Program, designed to facilitate the enrollment process for multiple life cases, provided a policy on each of the 23 physician owners, along with a policy for the group's business manager who also had ownership. These universal life policies would, in turn, provide the flexibility the practice was looking for along with the funding needed to fulfill their business continuation program.

The result

For the client: Often times, clients have preconceived notions about types of policies and their benefits. The willingness of the agent and his consultant to go outside the business manager's comfort zone allowed the client and his partners to overfund the life policies chosen and guarantee access to the cash accumulation needed to buy out each physician when the time comes.

For the agent:

24 Guaranteed Issue UL policies, $900,000 face amount each
$550,000 Target Premium

If you have clients who are in need of this kind of distinctive approach to creating workable solutions, call your Life Sales Consultant today.

FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 11587 - 2011/3/10 | 17706 0731111

Lifetime Builder II (Policy form 2ECI06) is issued by Aviva Life and Annuity Company, West Des Moines, IA. Product features, limitations and availability vary by State. Availability varies by state.

Guarantees provided by life insurance are subject to the financial strength of the issuing insurance company; not guaranteed by any bank or the FDIC. Agents may not give tax, legal, accounting or investment advice. Individuals should consult with a professional specializing in these areas regarding the applicability of this information to his/her situation.