by Prof. Robert Bloink and Prof. William H. Byrnes

Wellness programs have received significant attention in recent years—primarily as a mechanism for saving on health insurance costs in conjunction with employer-sponsored health insurance plans.  Today, however, a new group of insurance carriers have caught on to this trend—life insurance carriers offering policies in the individual market. These wellness initiatives operate similarly to those used in connection with health insurance plans with one key difference: not only can they help clients reduce the overall cost of life insurance protection, but they can actually provide a way for clients to increase their policy value—giving many an incentive to stop and take a second look at life insurance planning possibilities.

The Life Insurance Wellness Initiative

Wellness programs implemented by life insurance carriers are similar to those employed in the health insurance arena. Participants are offered incentives for engaging in various health activities (and refraining from unhealthy ones), including annual health screenings, regular dental care and various forms of physical activity.

A point system is employed so that clients are motivated to reach various milestones (such as silver, gold or platinum status, depending upon the product) by earning points for walking, running or taking an online health class, for example. Each policyholder’s health-related goals are customized to take into account his or her beginning health status, age and other personal information.

Many of these products use new technology—such as ‘Fitbit” bracelets that are worn by participants—in order to track physical activity, heart rate and sleeping patterns. Participants can also keep track of their activities online. Generally, the more points a client accumulates through the program, the greater the savings that he or she is able to realize within the life insurance product.

Increasing Policy Value

Wellness programs have been offered in conjunction with both permanent and term life insurance products. As a client accumulates points through healthy living activities encouraged by the wellness program, he or she becomes able to reduce premium costs or increase the cash value in a permanent life insurance policy.

Some estimate that a relatively healthy middle-aged couple could save upwards of $25,000 in life insurance premium costs if they live to age 85 and reach a certain level in the wellness program each year. Carriers also offer cash value growth potential that would be unavailable absent a client’s reaching various wellness goals.

This initiative comes at a time when many life insurance carriers have actually raised the premium costs for some policyholders. Further, it encourages clients to consider permanent life insurance policies that have become less lucrative in today’s low interest rate environment—giving clients a way to increase the cash value in a type of policy that has performed poorly in recent years. Without this type of wellness incentive, many clients have actually had to increase their premium payments in connection with universal life insurance policies in order to maintain the policy’s original value.

Despite this, clients should pay attention to the costs associated with these policies to ensure that premium rates are competitive and, as always, must look closely at the fine print to maximize policy value.

Conclusion

The life insurance product marketplace is constantly changing.  As we move into an era when changes in the health insurance market have encouraged the use of cost-reducing wellness initiatives, it is not surprising that life insurance carriers have caught on to this trend in health awareness.

See also: Will 2015 Be the Year Financial Wellness Finally Takes Off?

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