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Do you have clients who are 50 and older who recently purchased term insurance?

Do you have clients who are reluctant to buy variable universal life due to market volatility?

Has whole life proven too expensive for your clients permanent coverage needs?

If you answered yes to even one of these questions, then you may be leaving your client at risk and leaving commission dollars on the table.

Universal life products, particularly the new generation of products with secondary guarantees–which provide up to lifetime guaranteed death benefits–just may be the right solution.

Recent sales data reflects there is increased interest in UL with secondary guarantees. This has occurred for several reasons: market volatility has kindled a renewed interest in products with guarantees; and the geopolitical climate has reinvigorated many clients needs for security, while reducing their willingness to commit the significant premiums required to adequately fund VUL and WL contracts.

In addition, baby boomer demographics have played a significant role (fortunately, a far more predictable role than the capital markets or geopolitics).

Americans are living longer. The number of Americans ages 45 to 64 increased by 34% during the last decade, according to 2002 data from the U.S. Department of Health and Human Services. In fact, average life expectancy hit a new high in 2001 of over 77 years, up from 69.9 years in 1960, according to the CDC National Center for Health Statistics and National Vital Statistics System.

Despite this increase in longevity, industry sales data demonstrates that producers are selling more term coverage to people who are living longer. For instance, over two-thirds of individual insurance purchased in the U.S. during 2002 was term insurance, according to figures from LIMRA International, Windsor, Conn.

In fact, term sales have exploded. While the industry overall grew at 3% in 2002, LIMRA reports that term life sales increased 13% and level term represented 91% of all term face amount issued.

As trusted advisors with fiduciary responsibilities, are we doing what is best for our clients? Is term coverage the best solution for a clients long-term planning needs? If not, how can producers shift at least some of their level term life sales to permanent life products?

The key is to position UL as an alternative to term. Doing this involves simply highlighting the frequently overlooked limitations of term insurance. These limitations resonate particularly well with clients who are age 50 or older. To do this, ask your clients two critical questions:

1) Do you want your life insurance in force when you die?

Clients need to understand that the majority of term life contracts do not pay a death claim because they either convert, lapse or are not renewed. Next, ask:

2) Is there any possibility that you might need this insurance for more than 20 years?

Industry statistics show it is likely that clients may outlive the level term period. For example, based on the 2001 CSO Table, the average non-smoking, 50-year-old male stands an 81% chance of outliving his 20-year term insurance.

In addition, clients options late in the term period are limited. By age 70, diabetes, cancer and hypertension have struck many people. The clients only options at that point are expensive conversion or potentially cost prohibitive guaranteed renewal rates.

Many producers find that clients aged 50 and older are generally more likely to be in tune with their mortality and will acknowledge the likelihood that they will need and want their coverage for more than 20 years. For these clients, UL with secondary guarantees can provide an affordable and more flexible alternative to term insurance. (To review the advantages of UL as an alternative to term insurance, see the chart.)

The bottom line? The new generation of UL products offers clients an enhanced degree of control and flexibility in their insurance planning. It also provides producers with the right product at the right time to respond proactively to the changing needs of an evolving life insurance marketplace.

As this market continues to evolve, expect to see companies develop new and unique insurance riders that will prevent the commoditization of the UL product line and underscore the products intrinsic value.

. CLU, ChFC, LUTCF, is vice president-life and disability marketing for MetLife, Bridgewater, N.J. He can be reached at bdehais@metlife.com


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 21, 2003. Copyright 2003 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.