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Life Health > Life Insurance

Are your life insurance clients uninformed?

By Charles K. Hirsch

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Survey after survey finds most Americans possess little knowledge about life insurance and what it actually costs. But what are real-life producers finding out in the field? Are consumers as uninformed as they seem?

Three top producers share their thoughts on Americans’ life insurance education levels.

For part one of this article, see: How do you educate prospects about life insurance?

Q. In your experience, is the market you serve generally aware of the importance of life insurance coverage, or are people generally uninformed? And how does that factor in to your personal sales approach?

Michael L. WeintraubMichael L. Weintraub, CLU, president of the retirement division of Ascension Benefits & Insurance Solutions: Most of the people in my market, as well as most people in the United States, understand the importance of life insurance. According to a number of LIMRA studies, the majority of those asked say they are going to buy more life insurance because they know they need it. The wild card is always when?

A big part of motivating someone is to take action now. Go to a time share sales presentation and it’s all about “do it now or you won’t get an extra 50,000 points that will get you three nights at the Paris Marriott.” We need to talk about crossing the invisible line of insurability. Once that happens, life insurance is no longer available at any price. Talk about a friend or colleague or even a prospect who tried to get coverage and couldn’t because they crossed the invisible line or were rated so high they could no longer afford to pay the premium.

Sherry K. BartonSherry K. Barton, CLU, registered representative for NY Life Securities LLC, in Oklahoma City: What I am finding in Oklahoma, as I talk to many employers and ask to work with their employees, is that the majority of adults have never been asked to buy life insurance. And at the same time, they do understand what the product can do for their families. That is when I spring into action and write an application. We have three jobs as agents: to find clients, to service them and to promote the value of life insurance. We can delegate the service, but we cannot delegate the finding and the selling.

When clients or prospects come to see me and want to discuss a rollover or setting up an IRA, I can help them, but rest assured, the last item we discuss before they leave the appointment is the importance of life insurance in their overall planning. We, as agents, need to continue to ask.

Arkady MilgramArkady Milgram, CLU, ChFC, financial strategist and special care planner with Walker Financial Partners LLC, in Westlake Village, Calif.: Unfortunately, the general level of understanding of life insurance concepts, as well as overall financial education, is very low. Most people are confused and overwhelmed with contradictory information they receive through multiple sources, like the Internet, direct mail, TV and radio advertising, etc. So I usually show a lot of patience and try to ask as many questions as I can to understand where my prospects currently stand. From that point, I choose which of my approaches and resources would be effective in that particular situation.

There are many other specific and general topics I use to discuss life insurance, depending on a prospect’s overall knowledge and understanding of it. The most important quality of the producer is the ability to adjust client conversations to the appropriate level. You don’t want to complicate or oversimplify. This is the art and science of the selling process!

Q. Do you find that the prospects in your market generally have a good feel for what adequate insurance coverage will actually cost, or is this an area in which they are generally uninformed? And again, how does that factor in to the way you approach the sales process?

Barton: In today’s world, a great many consumers do not realize how affordable insurance can be to protect their loved ones, especially if you are discussing term insurance rates. I talk to people about paying off the mortgage and any other substantial debts, and then talk about how much they want their family to have when they are no longer living. I don’t emphasize how much they will need, but how much my client wants his or her family to have.

See also: Term life: An increasingly better option for clients

I take the face amount of a policy and break it down to the money it would generate for a family. For example, if a $500,000 face policy owner dies, and the family invests the benefit in a high-yield bond fund, the approximate value at 6 percent would be $30,000 annually. If you are replacing the income of a breadwinner who makes $70,000 annually, there is a shortfall. I tell new agents to sell million-dollar face policies, and base that on the income they are working to replace if the major breadwinner dies.

Milgram: Absolutely not. There is a huge disconnect between what people want and what they can actually afford! Again, the only way to address this issue is to educate, to explain what they’re actually getting — our true value proposition — and that usually helps to deal with the cost issue.

There are many different surveys conducted by LIMRA and other companies and organizations that suggest that between 20 percent and 40 percent of Americans believe they are grossly underinsured from a life insurance perspective. Why, then, is it so difficult to sell life insurance? It is because there is a huge disconnect between people’s desire to protect themselves from untimely death and their realization of how much that protection will actually cost, especially in the case of permanent policies. So it’s the agent’s job to make the real comparison between the benefits and the cost. People buy expensive cars and jewelry because they know why they want it. Instead of telling my clients why they need life insurance, I like them to want the coverage. This way, they will always justify the cost for themselves.

Weintraub: In the middle market, especially families within ages 30 to 40, they generally think term insurance will cost more than it really does. They are frequently surprised to learn how much coverage is available for affordable monthly premiums.

In more sophisticated business life and estate liquidity cases, prospects generally need far more education about the real nature of the problem and the cost of the solution with and without life insurance. Most of my business comes from CPAs who have already set up the need, and my job is to reinforce that and find the best coverage to solve the problem. So showing alternatives and educating about how life insurance is the best idea is the most valuable advice that can be given to a prospective client.

For part one of this article, see: How do you educate prospects about life insurance?

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