How to get the most out of term life products

Term life insurance is often viewed by purchasers purely from a price perspective: how low can you go?

Agents and clients alike seem to see term insurance mainly as a way to provide temporary protection with low premiums for a given face value. However, a term life policy packaged with one or more accelerated benefit riders can help provide clients not only with a death benefit but also with financial assistance if the insured has a qualifying illness or condition. Depending on the issuing insurance company, such illnesses or conditions may include critical, chronic or terminal illness or cognitive impairment.

Term life products with accelerated benefit riders are not "one size fits all," though. Nuances in structure and features abound, enabling brokers to help clients differentiate among the myriad offerings in the traditionally commoditized market for term sales.

Possessing insight on the key distinguishers among these riders can support your bottom-line business goals. As LIMRA President and CEO Bob Kerzner reported in an industry briefing on May 14, term premium and policy count were up two percent in the first quarter of 2013 — and more than one-third of the term riders reported positive growth. "Our researchers believe we should see steady growth in term as employment figures improve," Kerzner added. That certainly seems to bode well for agents considering the sale of term policies that include accelerated benefits.

The prospect of a continued increase in the sales of term policies and riders is also good news for existing and potential clients, given the valuable role living benefits can serve. Unexpected medical setbacks can happen any time, even to younger clients, and can have a significant impact on a family's financial stability. In fact, according to one study, more than 60 percent of personal bankruptcies are medically related — and that number includes people with health insurance.

An ideal product for the middle market

Millions of Americans, therefore, are potential candidates for the type of protection provided by a term policy coupled with a well-structured accelerated death benefit rider. However, such protection can be especially attractive for middle-market consumers who have a real life insurance need and also may find themselves with limited resources in the event of a qualifying critical, chronic, or terminal illness or condition.

In today's economic climate, these consumers are especially conscious of the need for their dollars to work hard — a fact you can leverage to help clients understand the value of a term policy with living benefits.

People interested in term products typically buy them based on price and get a policy that pays out only if they die. With appropriate riders, they can opt for a life insurance product they don't have to die to use. An accelerated benefit rider may provide for a benefit if they have a serious, qualifying illness or condition. Applicable qualifying conditions vary, but many illnesses that strike people today, such as invasive cancer, a major heart attack, or a stroke are frequently included.

Further, a term policy with a living benefit rider can help mitigate the need for a plethora of other products that may be unaffordable for a particular insured person, such as disability insurance, critical illness coverage and long-term care insurance. By helping to cover multiple needs, it can help families provide for their financial futures in an affordable way.

What's more, it's possible for clients to easily grasp the merits of a term policy with living benefits, since they probably (like most of us) know someone who has suffered a potentially life-changing illness. That friend, colleague or family member may have survived the condition but suffered a significant financial toll, causing undesirable changes in lifestyle. Further, with the uncertainty that still surrounds implementation of the Affordable Care Act, some people are worried they won't be able to afford quality medical care even if they have private health insurance.

Such worries appear to be well-founded for many. According to a NerdWallet Health report in June, an estimated 56 million Americans under age 65 will have trouble paying medical bills this year. More than 15 million American adults (ages 19-64) will use up all their savings to pay medical bills. The findings also indicated that more than 25 million adults in that age bracket will try to save costs by refraining from taking their prescription drugs as indicated, whether by skipping doses, taking less medicine than prescribed or delaying a refill. These behaviors can lead to additional medical conditions and expenses, and, therefore, increased financial fragility.

Riders may vary

Clients can benefit greatly from knowing that, if a qualifying critical, chronic or terminal illness strikes or if they suffer cognitive impairment, additional resources may be available to help. That's where accelerated benefit riders can be useful in helping to protect against financial setbacks. It is important to note that receiving a portion of the death benefit early will reduce the original life insurance amount, in some cases completely.

See also: 10 timely life insurance riders

Of course, if clients are fortunate enough to remain healthy, their families will receive the entire life insurance benefit when they die, provided the premiums have been paid in a timely manner and changes have not been made to the coverage.

As mentioned earlier, important differences exist among living benefit riders. Among the factors to consider when reviewing term life products with accelerated benefit riders:

Flexibility: People today seek products that not only do more than in the past but also allow them to exercise more control over how the products are used.
Multiple qualifying conditions: Some products allow for the acceleration of benefits given any of a broad range of qualifying conditions, from critical or chronic illness to terminal illness or cognitive impairment. For other products, the range of qualifying conditions may not be as extensive.
Lump-sum payout: While living benefits are often paid on a monthly basis over a period of years, some products offer a lump-sum benefit instead. That can be particularly important, for example, if a client wishes to pursue experimental medical treatment or has some other need where a lump sum is desired.
Waiting period: Certain products can begin paying living benefits as soon as 30 days after the issue date, while others carry a waiting period (for chronic conditions) of up to two years after the issue date.
Ability to accelerate all or part of the benefit: Some riders only allow a portion of the benefit to be paid out early, while other riders offer clients the option to accelerate all of the benefit if they wish.

While a client might assume that having one or more of the previously mentioned features built into a term policy may significantly increase the cost of the overall product, that's not necessarily true. Rather, there are term products also providing desirable living benefits with competitive premiums that may be even more affordable than some term products that do not offer living benefits. These value-added products offer clients increased choices and can help them survive financially what they may survive physically — with improved quality of life.

Ultimately, when considering term products with accelerated benefit riders, also look beyond specific product attributes to the carriers behind those offerings. Focus on companies that are clearly tuned in to client needs; that provide comprehensive educational resources for agents and consumers alike; and that give producers multiple ways to access an application handling system that's designed for simplicity, speed and success.

For more on term life, see:

Boosting your term life sales with predilective marketing

Convert that term … before retirement

Quarterbacking voluntary benefits enrollment