"Mark's Barks Blog - Under The Hood"We have all heard that phrase when it comes to buying a used car. The car may look nice on the outside, it could be shiny and look great but what’s under the hood is what really matters. Will it run well? Has it been in an accident?, etc. These are the things that truly matter and will determine whether or not you are really getting a good deal and that the car will last.

The same is true for most anything we buy, even life insurance. If you do a search for term insurance, you will see a list of carriers a mile long, listing products in order of price, from the lowest to the highest. Most agents gravitate towards the cheapest price, but have you checked under the hood and really kicked those tires? Is cheaper necessarily better? The least expensive is not necessarily the best choice. Here are some criteria to consider when selecting a carrier and more importantly, a product…

Are the policies convertible and if so, what are the provisions?

Some products don’t even allow conversions, which severely limits your client’s options down the road.  If conversions are allowed, up to what age/policy year can you convert? Some have age limits and some simply allow conversions for a finite number of years.  Lastly, what can you convert to? “Top-Shelf” products or selected less competitive offerings?

How does the carrier historically treat policy holders?

Some carriers have horrible customer service track records and that lack of service can become a direct reflection of you since you sold them the product to begin with.

What are underwriting expectations?

You need to know underwriting guidelines/expectations.  For example, let’s say you quote a Preferred Plus and during the exam it is uncovered that a parent died of cardiovascular disease prior to age 60, essentially moving your client out of the Preferred Plus range.  All things being equal, seek out a carrier that does not treat that unfavorably.  All carrier guidelines are different.  This holds true for other criteria such as Build, Driving History, Cholesterol Readings, etc.

Overall financial strength of carrier

Know the ratings and overall financial strength of a carrier.  A particular carrier may be a little higher in cost, but their ratings can be much higher, offering a better value to the consumer.

Term insurance is one thing and some will argue that term insurance is simply a commodity and cost should be the only driving factor when purchasing those products.  But when it comes to selecting a carrier for Permanent Insurance, it is even more complicated.  Things like the financial health of the carrier, underwriting criteria and policy service are important, but permanent products cannot be spread sheeted for price alone.    Whether you are selling Whole Life, Current Assumption Universal Life, Guaranteed Universal Life or Indexed Universal Life, you need too look at a number of factors beyond price.  Here are the some of the things you should be looking for:

Dividend Rates

When buying Whole Life policies, it is important to know how the carrier credits their dividends.  What goes into the formula and how will future performance be affected by lower than illustrated dividends?  Has the carrier historically supported their policies and are the projections realistic?

Loan Rates

For most permanent products, it is expected to take income from the products at some point in the future.  With that in mind, you will typically take advantage of withdrawing to basis, then borrowing, so that the money coming out of the policies will be treated in the most tax favored way.  Be aware of Variable Loan rates v. Fixed Loan Rates and how they can adversely affect the policy.  Variable loan rates often allow you to illustrate larger streams of income but in reality the consumer is negatively affected.  Use more realistic assumptions and be mindful of the loan spreads between products.  You may show less income on an illustration but the expectation is more realistic.

Guaranteed Death Benefit v. Limited Guaranteed Death Benefit

Guaranteed Universal Life (GUL) Sales often show long term Death Benefit Guarantees, but there is little or NO cash value to speak of.  There are some Universal Life products that offer limited Death Benefit guarantees, often to the insured’s life expectancy and beyond.  In addition, there is cash value associated with the product and in some cases, very high cash value.  Although the GUL may be less expensive, consider a product that may be marginally higher in cost with a limited death benefit guarantee and cash value.  The client may want to take that route since they have more options.    There are also Indexed UL contracts offering full death benefit guarantee options along with the upside potential of earning high cash values.

Features & Benefits

Know the features and benefits available with all products, especially if you are spread sheeting.  Subtle things can separate you from your competition.   There are so many types of added features that can be attractive to your clients.  As an example, some carriers offering Survivorship GUL have a feature that within certain windows of time, will allow your client to receive ALL of their premiums back regardless of any policy cash value being present.  That can and does make sales and there is typically no cost associated with it.   It’s just a matter of knowing it is there.  Other features such as Long Term Care, Chronic Illness Riders and Income Protection Options are other examples of the types of features that are available.  There are also other features such as Charitable Giving riders that give an extra 1% of death benefit to a named charity without additional cost.

As you can see, there are so many ways to improve how you are perceived by your clients, but that is just the tip of the iceberg.  Just because a product is less expensive, doesn’t necessarily mean it is the best option for your client.  Explain the policy features, the carrier’s financial strength and the overall value behind what it is they are buying and you will separate yourself from the competition and they will appreciate you more.

Just like buying that used car, kick the tires and look under that hood.  Know what it is you are really selling.  You will be surprised at what you see and the value you provide will last for miles and miles.

 

 

Mark Milbrod

About Mark Milbrod

Mark’s Barks Blog is authored by Mark Milbrod, the Principal of our New Jersey Sales Office. Mark brings over 30 years of experience to his insightful commentary on the insurance industry. Through his Blog posts, you will learn about new sales trends, be educated on selling techniques and overall, think differently about your role as an insurance professional.

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