Spreadsheets are one of an advisor’s most useful tools. They make it easy and quick to compare life insurance products, and are also an effective way to present options to a client. Moreover, spreadsheets convey a sense of objectivity that build’s client confidence.
At the same time, spreadsheets have limitations. They don’t tell the whole story. What is left out of a spreadsheet can be the difference between doing an acceptable job for a client and a superior one. Here are seven key things that spreadsheets leave out.
1. Carrier financial ratings.
AM Best ratings might show up but overall Comdex numbers typically do not. There can be just a few dollars difference in premium between a carrier with a 68 Comdex and one with a 93 rating. It’s an indicator of company strength and can foretell the long-term viability of the carrier.
Lower Comdex carriers could more likely be acquired or merged at a future point and then the policyholder could be making payments to a different company than they originally applied with. New ownership could also negatively impact future convertibility options and, should they terminate agent contracts, the policyholder would be left to deal directly with the company.
2. Living benefits and available riders.
The “old days” of just having a Waiver of Premium and a Child Term rider are gone. Carriers seem to be falling over each other adding such attractive features as Long-Term Care riders, Chronic/Critical Illness riders, Return of Premium options and Longevity riders. Benefits like these provide assurance that a life policy will grow with the applicant and accommodate future life changes.
While few term life insurance plans offer these benefits, they should be an important consideration when seeking permanent coverage. Agents should present plans that can grow and adapt to client needs, rather than putting them in policies that handcuff them with no exit strategy, other than death or policy lapse.
Features such as grace periods and catch-up provisions can also vary by company. The more generous a company is on these, the better it is for the consumer, especially if they might be inclined to pay their premiums at the last minute.
3. If term life, conversion criteria, product restrictions.
Advisors know that term conversions are anti-selection against the insurance company, since, typically, only policy owners with a health change actually convert their policies.
Agents should look at the conversion options of the term plans that they place their clients with. Some companies will limit the amount of time you can convert the term policy to just a few years, and it could be years before the level period of term is up. This is especially true when proposing term plans to applicants in the 60+ age range.
Some carriers restrict their portfolio of permanent plans when policyholders convert to noncompetitive and more costly products. Others offer a small window of time to convert to their better plans, typically five years, before dusting off a much higher cost product from a shelf in the back room and forcing this on unsuspecting applicants.
Consumers are best served by term plans offering unrestricted access to permanent plans. If the base term prices a little higher, it’s worth the extra cost if the plan is converted.
Agents should point out conversion features when showing carriers on a spreadsheet. While most applicants at the point of sale say that they have no intention of converting the policy, they also have no intention of having a health change or needing the coverage beyond the proposed level period, but life changes. Clients are best served by being shown plans with the most flexibility and consumer friendliness, and not just the lowest cost when it comes to selling term policies.
Agents should be aware of post-issue policy changes and inform affected clients who may have changes with their health.
4. If permanent life, cash values, favorable or unfavorable access to policy values.
It’s the same with permanent plans. Simply speadsheeting premium numbers doesn’t even begin to tell the story that clients deserve to hear. What benefits do they offer? Do they generate any cash value build up at the spreadsheet premium? Can the consumer access the policy values favorably if they do?