This past March saw historic rainfall here in New England. Roads were closed, basements were flooded and many hours were spent pumping and vacuuming out water. Many of us wished that we had installed a sump pump or at least made it to Home Depot before they sold out of wet vacs. While the rain this spring was historic, it struck me that this wait-and-see human behavior is typical in many areas of life.
Just look at what has happened in the life insurance business lately. Clients have been sitting on their hands, fences, and other proverbial procrastination posts, as evidenced by the precipitous sales declines in universal and variable universal life coverage in 2009.
In this uncertain economic environment, it’s easy to understand their hesitation. When you’re being tossed around, the natural response is to hold on tight.
But just as folks regret not installing a sump pump before a rainstorm hits, they’ll wish they had bought life insurance in 2010. Although the massive stimulus bill has dispersed the clouds of the last big economic storm, there’s always another one brewing, whether in the form of national policy changes or an unforeseen personal crisis. By building your clients a sound insurance lifeboat, you’ll prepare them to weather the next storm–and position yourself for a full pipeline of sales.
Opportunities To Think About Now
Saying “the time to buy is now” may sound like trite salesmanship, but it’s the truth. Consider a few realities:
? The ballooning federal deficit will require significant tax increases to pay down.
? Your best clients will be the target of these increases.
? Although it has yet to be defined, there will be an estate tax, and likely a significant one.
? The tax characteristics of life insurance today are as favorable as ever.
? Because permanent life insurance is so favorable, the federal government could target it for revenue generation.
Once your clients understand these facts, they may be more inclined to start writing premium checks. Let’s consider a few strategies you can use to inspire the fence-sitters to action.
? Term life–With life insurance, the easy and inexpensive option has always been term life. But term life is often sold as a stand-alone solution, without a game plan for conversion to more comprehensive coverage. For clients who have long-term needs but short-term cash concerns, selling term with a time frame for conversion can help you position them for the coverage they’ll need down the road.
? Universal life–Recent increases in premium costs have signaled that the party may soon be over for guaranteed no-lapse UL insurance. Companies are realizing that undercutting the competition by a buck isn’t a sustainable business model, particularly in this interest rate environment–and the premiums continue to escalate. If your clients are looking for low-cost lifetime death benefits with a guarantee, now is the time to buy a UL policy.
? Variable universal life–When the market is in the doldrums, it makes sense that clients would avoid VUL coverage. But if your outlook is bullish, this may be the perfect time to take advantage of market volatility with systematic premiums into a VUL policy.
While much has been made about Roth conversions in 2010, VUL offers Roth-like tax treatment without limits. If clients are concerned about another dip in the market, indexed products provide more potential upside than many fixed products with downside protection. Why wait for tax rates to go up or the market to rise further?
Start Small, Think Big
Regardless of the type of policy you’re selling, it often makes sense to start with less coverage than your clients really need. You thereby allow them to get comfortable with the strategy–and decrease the odds that they’ll walk away with a “we’ll just hold off for now.”
When clients see the growth in even a small whole life or VUL policy in your next annual review, they may be willing to implement the full amount of coverage you recommend.
Weigh Cost Vs. Consequences
With costs continuing to rise, it’s important to be sure that insurance premiums fit into your clients’ budgets. Perhaps even more urgent is the need to discuss the potential consequences of not taking action.
Regardless of what estate taxes look like next year, or what the market situation and fiscal policy will be, the wait-and-see philosophy won’t take care of a family if tragedy strikes. Educating your clients about the worst- and best-case scenarios will help them understand why you’re recommending an insurance safety net.
From your clients’ perspective, to be bold brings risk; to wait and follow brings comfort. But in real-life storms, waiting leaves you unprepared and possibly underwater. In our business, it can leave clients undercapitalized or uninsurable.
With storms on the horizon in 2010, successful agents will help clients understand that now is the time to embrace insurance as their lifeboat. And when the flood comes, whether it’s a mere inconvenience or a soaking of biblical proportions, your grateful clients will thank you–and invite the people they care about into your boat.
Brian Harrison is the director of insurance marketing at Commonwealth Financial Network, Waltham, Mass. He can be reached at [email protected]