Traditional Life Does Fit Into Financial Plans, And Heres Why

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Can producers make it in business today by selling traditional life insurance products?

The answer is a resounding yes.

However, producers must first understand their clients needs for the crucial coverage these products provide. Then, they must expend the time and effort required to educate their clients on that need.

During the past decade, financial planning has centered on providing retirement income, not protection against premature death. Many life insurance agents focused on the 60-plus age group and the 401(k) plans held by the same. Life companies strengthened their broker-dealer affiliations, which resulted in astronomical growth in equities and variable annuities. And dot.com companies and tech stocks led the stock market to new heights.

With the “graying of America,” there is no doubt that retirement needs must be given proper attention. However, the tragedy of last September 11 emphasizes that serious attention must also be paid to the financial welfare of families and businesses in the event of premature death.

In fact, such welfare must be the priority. Three thousand people died as a result of 9/11. Most were relatively young, with families. Many were key executives of their organizations.

Therefore, the “need” for life insurance is not the question. September 11 has reminded us that people do die prematurely–from heart attack, cancer, accidents and other tragedies. The real issue is how to fund for those premature deaths once clients are convinced of the need to do so.

The type of life insurance to use for this, of course, depends on the clients needs, stage in life and economic status. Term insurance works for the short term, but premiums become prohibitive as people age and get closer to actuarial mortality.

Whole life, universal life and variable universal life are good long-term solutions. Indeed, when the market was on its upward spiral, many clients gravitated to VUL, because of its death benefit and investment potential. VUL is still a good product, but many clients are now looking for less volatility based on the equity market.

Therefore, it should not be surprising that whole life is making a comeback. Thanks to its fixed premium, guaranteed cash values, paid-up additions, and extended term insurance, it is well suited for clients seeking more stability. They can sleep at night and not be afraid to open the next mornings Wall Street Journal.

Remember, in whole life, dollars not needed for actuarial death benefits go into the life insurance companys general investment fund. This is usually a conservative one, with 80% or more invested in high grade bonds.

The chances of earning a dividend, which will increase the guaranteed cash values, are good. And, as long as the client pays the fixed premiums, which will never increase, the death benefit will be there.

Universal life is the compromise between whole life and VUL. It has a term insurance base for the death benefit. Additional dollars are also invested in a typically conservative general fund. However, the premium can increase because of increased mortality, loading or operational costs and investment returns.

For agents who are committed to working with their prospects and clients to create a sound financial plan, permanent life insurance offers great potential for success. But here again, the basics count, so agents need to heed certain fundamentals such as those in the chart.

The biggest challenge for agents is to convince clients of this need. It is not easy to ask people to consider dying. But it is reality, and a good financial planner can help clients deal with it.

Finally, the agents activity level is paramount. Seeing two people a week wont sell much life insurance, but 10-15 interviews a week will create good opportunities for selling permanent life insurance.

Timing is also vital in our business. Some people take planning seriously; others are preoccupied. But dedicated agents with substantial activity, good knowledge, and solid planning processes are selling more permanent life insurance today than ever before.

, CLU, ChFC, CLF, is executive consultant at The Penn Mutual Life Insurance Company, Horsham, Pa. You can e-mail him at stewart.maury@pennmutual.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 15, 2002. Copyright 2002 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.