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Seeing Whole Life In A New Light

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Consumers are continually seeking new and better ways to prepare themselves and their loved ones for a solid financial future. That’s why they often give in to the temptation to chase the latest trend and “sexiest” new strategy.

Popular consumer media fuels the fire by pushing the hottest new stock, the next emerging sector, the most exotic investment.

Often, however, the more things change, the more the tried-and-true strategies remain the same. That’s the case with permanent life insurance. Some of the most successful producers and many consumers consider proven and time-tested whole life insurance as a valuable cornerstone to an individual’s financial plans.

Unfortunately, a good number of consumers reflexively don’t think that way. They are persuaded by the mantra that they should “buy term, invest the rest.”

The simplicity of that slogan works in its favor. However, it ultimately does many consumers a disservice. It gives people advice that is neither actionable nor considerate of the complexities of their insurance planning needs.

First, “buy term, invest the rest” disregards the fact that a great many people lack the discipline to follow the “invest” part of the slogan. In practice, it turns into “buy term, and spend the rest.”

Indeed, Americans spent more than they earned last year, even as the economy grew. This pushed the personal savings rate to -1.0%, the deepest hole since the Great Depression of the 1930s (U.S. Commerce Department, Jan. 31, 2007).

Second, the slogan implies an “either-or” choice, when for many consumers the best solution lies in a combination of products. For example, adults who buy combinations of permanent and term insurance have the best coverage of all, averaging $306,100 for men and $198,200 for women (LIMRA International, 2005).

For certain consumers and in certain situations, whole life makes eminent sense. That’s why almost 2 in 3 insured adults have some permanent insurance as part of their individual life portfolios (LIMRA International, 2005).

It’s time to look at whole life–or permanent insurance–in a new light. It’s time for people to think “perm,” not just “term.” It’s time for the industry to remind consumers of the attributes that make whole life not only a great solution but also a product well-suited for a time when all are increasingly seeking permanence, stability and guarantees in an uncertain world.

By helping consumers see the whole picture on whole life, agents not only do well by their clients, they also build their practices. Here are just a few ways that whole life can help them do so:

o Whole life helps reset the context of the client relationship from transactional to lifelong.

o Whole life insurance has the most favorable persistency experience, with an overall lapse rate of 3.9% on a policy basis, according to LIMRA (2006).

o Whole life’s guaranteed cash value enhances the agent’s ability to help clients plan for future financial needs–e.g., college tuition, care for an aging parent, down-payment on a retirement home, etc.

o Whole life’s cash values can supplement income in retirement. (Note: Keep in mind that accessing cash values, via borrowing or partial surrenders, can reduce the cash value and death benefit, can increase the chance of policy lapse, and may result in tax liability if the policy terminates before the insured’s death.)

o Whole life is a great insurance planning vehicle to provide funding for estate taxes and charitable gifts, enabling the policyholder to provide a legacy for loved ones and favored organizations.

o Whole life’s features support the image of a well-informed, forward-thinking agent. Consider: Though not guaranteed, dividends from a solid company can provide a resource the policyholder can receive in cash or use to purchase additional insurance to increase the death benefit and cash value, or use to offset some or all of the premiums due. Further, like other permanent insurance products, whole life offers tax-deferred buildup of cash values and, generally, a tax-free death benefit. Also, agents will never have to tell clients that premiums have gone up. Agents additionally gain peace of mind, knowing they’ve serviced their client well by helping them secure their future and diversify their portfolio with a guaranteed product.

o Choosing the right carrier–one with excellent ratings and a history of permanent dependable solutions–enables agents to sell with confidence.

o Investing time in educating a prospect about whole life can pay off in a lifelong relationship with ongoing, favorable compensation.

In life, there are few guarantees. With whole life, there are many. It’s time to trumpet that fact to clients and prospects.


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