The hidden cost of insurance: Half glass full or glass half empty?

By Jeff Reed

Kestler Financial Group


Today I want to talk about one of the rather significant impacts of the unprecedented price change activity we have experienced in 2012.

So, what is this mysterious cost buried beneath all of the other communication about price changes? The answer is the cost of waiting to convert a term contract.

We all know that insurance increases in cost as we age, so what's the big deal? The big deal is the magnitude of the price increase. Simply put, if any of your clients have been considering converting term insurance as part of their risk management strategy, they really need to consider doing it now, before they are faced with prices that may be 10 percent to 15 percent higher as soon as next year.

How did I arrive at 10 percent to 15 percent? Pretty easy math, actually.

Start with a price increase of 10 percent (or more) in some cells, and then sprinkle the fact that the client is now one year older on top of that to arrive at the total cost increase.

At this point, you may be wondering where the keen insight is that you have come to expect? This is a really simple bit of math, after all.

Frankly, the insight comes not from understanding the numbers, but from understanding what to do about them. Let's start with one simple fact: Our clients do not sit around watching insurance prices. That is what we are here for. Now that we are faced with a known increase of such a significant magnitude, it is time to communicate not only the facts, but our recommended course of action to our clients.

As with most things in our business, there are two ways to look at this: glass half full or glass half empty.The glass half empty approach focuses on the fact that prices are increasing. You know how popular price increases are with the public. Even if they understood why prices are going up, they still would not care, and may even use that as a reason not to buy. I can hear it now: "Damn insurance companies.....conspiracy.....out to get the little guy".

This may be a little extreme, but I think we can all agree that there is at least a part of most clients who are going to react this way if we approach them in this manner.

The glass half full producer focuses on the opportunity. By taking action today, the savvy client can save thousands upon thousands of dollars on their insurance over their lifetime. Viewed through this lens, our clients have an entirely different experience. Rather than being the harbinger of doom, we are now providing solid advice on how to manage their life insurance based on what we see the market doing over the next few years.

Just what kind of difference can this make? Let's follow this idea of providing advice.

If we were talking about investment recommendations and we could increase a client's actual rate of return by 1 percent, don't you think that would make a significant difference over the long haul? Absolutely it would!

Clearly, it is time to get out there and show the value of working with a life insurance professional.