Heres a Way To Put `Life Back Into Life Insurance

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While Americans have many different opinions and viewpoints, there is one issue that we all seem to agree upon: We will beat the odds of dying a premature death.

Face it, life insurance sales are often so difficult because individuals refuse to accept the fact that they are going to die anytime soon. Like procrastination, humans have a natural desire to avoid unpleasant thoughts like death.

As you will see, producers can redirect this type of thinking if they know what to do. Well look at some ideas on how to do that here. But first, well recap the prevailing attitudes.

If you really have a passion for the insurance business, you already know that as a country, we are vastly underinsured for life insurance. According to a recent survey by LIMRA International, Windsor, Conn., 38% of United States households believe they are underinsured.

But if you ask individuals under age 60 when they expect to die, most, if not all, will say, “In my 80s or early 90s!”

For those above age 60, the prediction may even extend beyond that.

This is certainly understandable, given that average life expectancy has increased dramatically in the U.S. over the past 100 years and that new mortality tables are expected to be unveiled in the next couple of years that will extend life maturities well past age 100. Some futurists are even predicting that children born today could easily live beyond age 100.

However, those are broad-based trends. The job of the insurance professional is to help clients understand todays reasonable expectations and the data that is relevant to the clients own projected mortality.

Thats not always easy, for although we face the mortality of others with relative ease, its human nature always to believe that we will surpass the odds.

However, if you the producer show clients actual tables that highlight the likelihood of reaching a certain age, it really helps clients understand that their own predictions of outliving the average need to be tempered by the realities of statistical probability. And that helps you put the life back in life insurance.

On this page is a table that details the reality of dying, based on smoking status for various ages. In addition to showing a strong reason for your customer to quit smoking, this data also makes it quite apparent that a great majority of Americans will not beat the odds of a premature death.

(Note: Annuity tables were used in the calculations, not mortality tables. Therefore, the numbers provide, if anything, conservative probability values.)

This can be critical information for consumers. When they see that the probability of their dying at an earlier age can be statistically proven, life insurance protection begins to make more sense to them.

But how do you get the client to see that? For most products, your carrier illustration system should allow you to illustrate internal rates of return calculations on death benefit for all years. By comparing the very real probability of not outliving the mortality averages to the IRR on death benefit protection, you can show that the power of a life insurance contract cant be underestimated.

Also, note that that the IRR numbers are on a tax-deferred basis, so the resulting tax-equivalent yields might possibly be much higher.

Plus, remember that if your carrier combines “living benefit” protection–including disability income, unemployment, terminal illness, and/or chronic illness protection riders–within the insurance contract, you can deliver a package to your customers thats unparalleled in the financial services industry.

Michael S. Pinkans, CFA, CFP, CLU, ChFC, is a registered representative/investment advisor with Equity Services, Inc. and vice president of sales at National Life Insurance Company, Montpelier, Vt. You can reach him at: Mpinkans@nationallife.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 20, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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