The term insurance product you should be selling

By Jeff Reed

Kestler Financial Group


Term insurance is term insurance, right? While I can make an argument that there has been very little historically that has made a meaningful difference to the typical term buyer, I think there is a new product out there that changes the game.

How so? It’s all in the client’s ability to manage their coverage over the long haul. Rather than simply focusing on the product’s conversion language, we need to turn our attention to how a client may actually use their coverage. We all know that precious little term insurance is actually converted. The real question is why? The obvious answer is price. The last thing most consumers want to do is increase their insurance premiums as they age. In fact, there may be a smaller perceived need for insurance just at the time we come knocking on their door with the option of conversion, pay the renewal premium, or let the coverage lapse. None of these choices are typically met with much enthusiasm.

What if, however, we could come to them with a fourth option? What if that fourth option was to continue coverage at the same premium, but with a reduced face amount? Sure, they would rather continue the coverage at the same premium and face amount, but that ship sailed back when they bought term insurance.

One carrier feels so strongly that they built this option into their term contracts, maintaining the level premium beyond the initial guarantee period by using a schedule of face amount reductions as the client ages. They didn’t stop there. Rather than tie the conversion rights to the level period, they built the product with a conversion period of 20 years or age 70, whichever comes earlier. This conversion right is there even if the level premium period has expired.

Of course, the newly converted policy will be at the reduced face amount that is in force at the time of the conversion, but the alternative of letting the coverage simply lapse at the end of the level period pales in comparison. The icing on the cake for this product is that it is very competitively priced, and available from a carrier that most of us already do business with.

This new product is part of an emerging trend in 2013. We all know what happened with NLG pricing in the fourth quarter. One of the byproducts is a movement away from spreadsheet selling and back to actually making recommendations based on the entire feature set a product can deliver. Look for this to come up again and again as we continue to explore the 2013 product landscape in more detail.