Clients often ask me, “What’s the best life insurance policy?” The appropriate answer is not as simple as naming a carrier and their newest product. If I were to rephrase their question, it would be: What kind of life insurance fits my situation, or do I need it at all? And which life insurance company has products that are right for me and my family? To answer these questions for your client and narrow their options, here are some important considerations --
Lifetime Commitment
Whether a client chooses term life, whole life, universal life, indexed universal life depends on a number of factors. And unlike many other financial products available, their life insurance product selection may have more permanent consequences.
If they choose cash value life insurance like indexed universal life, it can play an important long-term role within a well-balanced comprehensive strategy. And it may be the decision of a lifetime, both literally and figuratively.
This is why it’s so critical to find carrier and product that meets the long-term goals of the client. Choosing a product based on one feature, isn’t a thorough enough assessment.
No Guarantee of Future Qualification
A cash value life insurance applicant might be healthy enough to become insured today, but there is no guarantee that in the future they will be able to qualify for a different policy.
Therefore, if they get into a policy that looks attractive on the surface, only later to find out that the carrier doesn’t honor their promises or it doesn’t suit the client’s needs, that policyholder could be stuck with the wrong type of policy. They may not be able to exchange it for another one with a different insurance company if they are no longer insurable.
Carrier Considerations
Insurance companies are always innovating and vying for your attention and your clients’ premium dollars. New product features and exciting new talking points are a frequent occurrence these days—not only to meet the needs of prospective policyholders, but also because there’s a need to stand out in a competitive marketplace.
You’ve probably encountered carrier representatives telling you how and why they’re better (or different) than their competitors. So, how do you help your clients make an informed decision?
One very important consideration is how they treat their existing policyholders. After all, what good is a promise to do something extraordinary if you fail to deliver and as a result, disappoint existing policyholders?
If your clients knew they could try a different product or insurance company with ease, maybe it wouldn’t be so important to choose the right one initially. But because they don’t know what their health will be like down the road, they need to make the most informed and educated decision they can right now.
Look for Consistency
I’m not going to tell you which companies I think have demonstrated a consistent behavior of treating their existing clients as good or better than their new clients, or call out those who do not treat their existing policyholders well. You and your client can conduct your own research and come to a conclusion.
However, what I will say, is that you should consider the facts beyond current product offering features and benefits. Look past the hot new crediting method on an indexed life policy or an illustrated non-guaranteed promise like a persistency bonus. Look at their ratings and longevity in the industry. You might also want to weigh the benefits of a mutual company over a publicly-traded one. Ask to see their renewal rate history.
Evaluate Past Actions
When selecting a life insurance policy for a client, I always recommend that the financial professional consider the insurance carrier's past actions and behavior before they become enthralled with the sparkling new features and benefits of the latest product.
Ask yourself: Do the risks of new features and promises outweigh the rewards?
Do you think that based on past experience the carrier is likely or unlikely to hold up their end of the bargain for the next 50 years?
Would you purchase the product for yourself knowing that you may never again choose something different?
As an independent financial professional, you have many options in terms of products, carriers, and even marketing organizations. It can be easy to slip into offering a client what you’re familiar with, but I would urge you to take advantage of the flexibility and options available to you and do a thorough analysis of what you could offer a client.
To get beyond any biases you might have, you can ask colleagues or your marketing organization to share their experiences with carriers and products. You can also research through the state insurance department or the National Association of Insurance Commissioners (NAIC). Then work together to narrow down what makes the most sense for your client’s specific situation.
Not only is carrier and product determination important, you also have to factor in the clients potential to pass underwriting—both medical and financial. Additionally, the client’s risk tolerance, budget and level of discipline should be taken into account.
After you’ve carefully considered carrier, product, and client profile, you can begin to narrow the options to what’s best suited for the client.
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