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23. 7 Million Reasons to Use
Cash Value Life Insurance
In today’s shaky economy, nothing beats the security of permanent life insurance.
Marvin H. Feldman, CLU, ChFC, RFC
With the high price of gasoline, it came as no surprise to ly said, “[The policies] provide adequate sources of liquidity for
see who is hurting in a very big way—the companies that the company’s current and foreseeable operations.”
make gas-guzzling recreational vehicles. In May, The Wall Street Put in a less corporate way, by tapping the life insurance pol-
Journal reported that Coachman Industries and Fleetwood En- icies, the company will use the extra cash to figure out a way
terprises are experiencing slumpi ng sales in large part due to gas through its m
being $4 a gallon and have been forced to take what
the newspaper called “drastic” measures to ease the strain.
Coachman’s decision caught
our attention. To remedy its
cash shortage caused by a 40-
percent decline in sales over three
years, Coachman borrowed against the
cash value of the life insurance policies it
holds on its highly compensated employees and
retirees. Coachman has borrowed $23.7 million ess and stay in business. That must be a re-
lief to the thousands of current and retired employees and their families who obviously have
a great deal at stake in the company’s
success.
Cash value life insurance was
never designed as an “investment,” but
it works well as an emergency reserve
fund with a rate of return comparable to
that of other investments categorized
TERM LIFE as safe without market risk.
or nearly half the cash-surrender value of what INSURANCE IS Life Insurance Awareness Month
it describes in its filings as “company-owned life insurance.” Coachman said in an SEC filing that A GREAT SOLUTION During Life Insurance Awareness Month (LIAM), perhaps you should
its credit line and life insurance policies provide TO A TEMPORARY share this story with your business
“adequate sources of liquidity for the company’s current and foreseeable operations.” PROBLEM. clients and prospects. There are many stories in which the cash value of life
This is a perfectly legitimate use of com- insurance has helped a company or
pany-owned life insurance, an insurance product used by em- individual weather a financial crisis.
ployers to protect against the financial cost of losing a “key” Term insurance is a great solution to a temporary problem or
employee, as well as to cover a wide range of employees and help for a situation in which the individual or company’s cash flow
provide funds for the payment of employee and retiree benefits. is insufficient to fund permanent life insurance. Supporters of
COLI can also be used in the event of an emergency, and what term insurance will always say you should buy term and invest
Coachman faces certainly qualifies as one. the difference. But in a financial emergency, especially in to-
day’s market, nothing beats the security and peace of mind you
can provide to your clients by having permanent life insurance
in place when they need it the most.
Use the LIAM campaign to strengthen your efforts in marketing insurance products through increased consumer awareness and education. With the proper educational resources,
your prospects and clients may make a positive decision regarding their financial security.
Make it a good month!
Helping the living
The Coachman case illustrates the “living” benefits of permanent life insurance, which can be enjoyed by individuals as well
as by companies. Many people have borrowed against the cash
value that accumulates inside their permanent life insurance
policies to pay off debt, pay for a daughter’s wedding or college
tuition or just cover emergency expenses.
In reading The Wall Street Journal story, it seemed as if the
reporter had the Coachman CEO Rick Lavers on the defensive
and was accusing the company of doing something unethical
or illegal. Perhaps the reporter didn’t think life insurance was
intended to be used in this way, and most certainly, he does
not understand how life insurance works. But, as Lavers right-
Marvin H. Feldman, CLU, ChFC, RFC, is principal of the Feldman Financial Group in Clearwater, Fla. He is president and CEO of LIFE
and a member of NAIFA-Pinellas. You may contact him at 727-723-
9020.
