What do advisors need to know about offering life insurance at the older ages? Here are some tips, in alphabetical order:
1. Costs of coverage. Carriers have increased older age insurance rates in the past year, reflecting new understanding of risks in the market, says Lynne Rosenberg Kidd of Los Angeles, Calif. Healthy clients often can afford the coverage, she notes. But “if someone is rated over Table 4, it can get very expensive; the cases often don’t get placed.”
2. Cover letters and ownership forms. Include a cover letter with the life insurance application that paints a picture on how independent and active the older applicant is, suggests Kidd. “Does the client drive, see friends and family, or do gardening?” And be prepared to submit the signed form that many insurers now require, testifying that the life policy will not be sold, says David Schumer of Competitive Insurance Services.
3. Documentation. Document any information, advice or recommendations given to the client to show “this was a fully informed decision at the time that meets the person’s goals and objectives,” recommends Brian K. Atchinson of the Insurance Marketplace Standards Association.
4. Education. More older consumers are surfing the Internet and so may have more sophisticated knowledge about life insurance needs and choices, says Atchinson. But they still need clear communications from the advisor and opportunities to ask questions, he adds. Advisors need education, too, on the senior market and its products, tax issues and related areas, he continues, so take advantage of available courses. “There can be a business advantage for advisors who do it well,” he stresses. “It makes you more knowledgeable and better trained.”
5. Financial. “Ensure the purchase will not hardship the client in any way,” says Kidd. “If there isn’t enough money to pay the premiums comfortably, it’s not a good case to write.” Also, the insurance should not make the person worth more dead than alive, she says. Agreeing, “you can’t sell a $3 million policy to a senior who is living only on Social Security,” says Schumer. “There is no financial justification for doing that.”
6. Health. Although older people can and do qualify for life insurance, previous health history does make a difference, cautions Schumer. For instance, “companies want to see older applicants who are getting regular health care and checkups….They are looking for people who are what I call ‘frisky, not frail.’”
7. Mental capacity. If the advisor is concerned about the older person’s mental capacity, “move slowly,” urges Atchinson. “The time to undo a problem is not worth what you get from making the sale now.”
8. Product selection. Not all products are suitable to all older age clients, so the challenge for the advisor is to understand the breadth of available products and usage in view of the client’s needs, goals and lifespan, says Atchinson. Remember, underwriting does not determine the suitability of the product, says Schumer. The advisor does. Schumer and Kidd both prefer to offer universal life with no-lapse guarantees–”so the client will have it forever,” says Schumer. Both avoid variable life and term insurance for this market. “I prefer low premium, maximum death benefit policies,” notes Kidd. Keep in mind that older people want to simplify their lives, adds Atchinson. That includes choosing simpler policies.
9. Replacements. Replacing an existing life policy held by an older person can be a “good, logical option,” says Atchinson. “But be careful the client has enough information to make an informed decision.” The replacement should not be driven by commission, he adds, but rather by needs and goals. Nor should replacement be done just so the client can have all the latest features; older people can be confused, misled or mistaken by upgrades unless they fully understand, he says.
10. Reputation. The financial professional must demonstrate honesty and integrity, says Atchinson. “You can’t build this overnight…but advisors who raise the level of their game will find they have a phenomenal market potential.”
11. Underwriting. In the last 12 months or so, companies specializing in older age life insurance have been cracking down on cases they will accept, says Schumer, and reinsurers are doing something similar. Therefore, agents should know there could be more declinations than approvals. One underlying reason: Carriers are finding it more difficult than originally thought to predict who among the healthier seniors will live longer and who will not, he says. A medical event, such as pneumonia or a broken hip, can have a greater impact on mortality at the older ages than at the younger ages, he explains.