Advisors who think they know all there is to know about term life insurance might be surprised to learn that these policies are finally being brought up to speed. Increasing demand for already popular term life policies has insurance companies jumping to differentiate their products in a crowded market. The result is a new generation of term life products that can be customized to meet the needs of an extremely diverse section of the market. Whether your clients are concerned about ensuring education costs are covered or providing enhanced benefits in the case of specific accidents, modern term life insurance might be the solution.
Popularity of Term Life Insurance
Term life insurance, which provides life insurance coverage only for a fixed period of time, has been identified in recent surveys as one of the most popular insurance products on the market today. Although term life insurance expires at the end of the policy’s term, providing no benefits if the client is still living at that time, many clients prefer term life insurance because it is a relatively low cost option that can often be obtained through their employers.
Despite this, financially savvy clients may reject term life insurance because benefits provided under these policies are often much more limited than those associated with permanent life insurance or annuity products, which typically allow clients to add on investment features or long-term care coverage.
New Product Developments
Recognizing the potential market for customizable term life insurance policies, carriers have begun offering a wider range of options in connection with these policies. Because the major drawback of a term life insurance policy is that premiums are lost if the insured outlives the policy term, many carriers now offer a return of premium rider that provides for the return of premium payments in the event that the insured is still alive when the term expires.
Add-on education riders can be used to provide for payment of a portion of the death benefit each year over a period of time (usually four years) to the insured’s dependents to ensure that funds are available to cover education-related expenses. Similarly, some policies offer professional retraining riders to cover these expenses, which can be useful for clients concerned about disability.
Child and spousal riders are becoming more widely available to provide for payment of proceeds upon the death of the insured’s child or spouse. These riders usually provide for a set dollar value to cover final expenses of the deceased.
Seat belt, airbag and helmet riders that provide protection in the case of death in an accident are also commonly offered.
While all of these riders are typically accompanied by a higher premium expense, they give clients the flexibility they need to design a product that furthers the individual client’s goal, and many are finding this well worth the cost.
While term life insurance coverage comes with its own set of risks, in many cases the ability to customize the traditional policy to meet the individual needs of the client, coupled with the potential for low premium payments, may make these policies a smarter option for many clients.
For previous coverage of the evolution of annuity product options, see How to Build Your Own Solution to Long Term Care Insurance Scarcity.
For additional coverage of this issue and similar ones, we invite you to sign up with AdvisorOne’s Summit Business Media partner, National Underwriter Advanced Markets, for a free trial.
You may also be interested in signing up for a free trial with another Summit Business Media partner, Tax Facts Online.