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Cross-Selling Life Insurance
In our lesson on long-term care, we talked about the hybrid and combination life and long-term care insurance options available.
Let’s switch gears and focus on Life Insurance, and this is a category with a wide variety of products and coverage options.
At its most basic though, life insurance provides financial support to surviving dependents or other beneficiaries after the death of the insured.
There are two main types of Life Insurance, term life insurance and permanent life insurance.
Term life insurance covers the beneficiary for a specified amount of time, paying out death benefits if death occurs during the term of the policy. When the policy expires, the beneficiary can choose to renew, terminate the policy, or switch to a permanent policy.
Permanent life insurance covers the beneficiary for the remainder of their life; the policy does not expire. These policies are usually a combination of insurance with a savings portion. Whole and Universal life products are both examples of permanent life insurance.
Before we go any further, let’s define those products as well.
Whole life products cover the beneficiary for the rest of their life and are available for adults as well as juveniles. Premiums are stable and the policy has a guaranteed cash-value accumulation. As long as your client pays their premiums, when your client passes, their beneficiaries will receive the benefits.
Final Expense is an example of permanent, whole life insurance. It’s usually referred to as burial insurance or funeral insurance and is issued in smaller face amounts. Final Expense is intended to be used to fund the costs associated with the policyholder’s funeral and other end of life expenses.
Universal Life Products also cover the beneficiary for life, but they offer more flexible options. Premiums are flexible, as are their payments, and policies include death benefits that can be reduced or increased as needed.
There are three different types of products under the Universal Life Product umbrella: Traditional Universal Life, Guaranteed Universal Life, or Indexed Universal Life.
Traditional Universal Life combines the benefits of a term life insurance plan with an investment component. Your client is insured for life and premium payments can be used to pay for the death benefits of the policy with a minimum premium, or accumulate cash value by paying the target premium or cash accumulation premium. Should the policy become underfunded, it will lapse and coverage will be terminated.
Guaranteed Universal Life is often referred to as no-lapse universal life insurance. These policies have guaranteed fixed premiums and do not earn any significant cash value. GUL policies stay in effect until a certain age. The most commonly chosen age is 105 or higher, so the client doesn’t outlive the policy.
Indexed Universal Life is a bit more complicated than its traditional or guaranteed counterparts. That’s because the cash value component of the policy is tied to the performance of one or more indexes, rather than a declared interest rate.
Premiums for these plans are still flexible, however, they are deposited entirely into the policy’s cash value component and they do not include policy charges.
Policy charges are deducted from that account containing the cash value component and any interest that the moneys earn from the indexes the policy is tied to.
It’s a product that helps your client realize some of the upside to investing in the stock market while protecting them from market downturns.
We say “some” because policies commonly include interest rate caps and can include participation rates.
Interest rate caps work like this:
If a carrier caps the interest on a policy at 5 percent, and the chosen index rises 12 percent during the interest crediting period, the policy holder will only receive 5 percent interest.
Should a policy include a participation rate, we’ll stick with our 5 percent interest rate and add a 50 percent participation rate, the client will be credited interest up to the cap, and receive interest at a 2.5 percent rate.
Indexed Universal Life policies should be reviewed annually to make sure they’re performing the way your client expects them to. The primary purpose of these plans is to accumulate cash value over the long-term, while also providing a death benefit. When funded properly, it can become a tax-free income stream for retirement.
Accident Protection and Accidental Death policies are another form of life insurance that pays out a lump sum if your client incurs a specific kind of injury as a result of an accident. We call this coverage Accidental Death and Dismemberment, or AD&D. It covers the unintentional death or dismemberment of the insured, and can include the loss, or loss of use of body parts or functions. Life Settlements are a relatively new product, a type of policy that grew out of the Viatical Settlements of the 80’s. These settlements allow life insurance policyholders who meet certain conditions, to sell their life insurance policy and recoup some of the benefits.
Life settlements are like a second opinion on the value of life insurance policies than the issuing carrier. Ownership is transferred from the policyholder to a third party, in exchange for a cash amount. That payment is usually more than the cash surrender value from the issuer would be, but less than the death benefit of the policy. Ritter works with highly specialized partners to provide you with the top life settlement products available.
As you’re meeting with clients, this is a useful option to consider if your client has a policy that they can no longer afford, they no longer need, has become underfunded, or are planning to surrender for their cash value to the insurance carrier.
Quite the list of products, which is great because with so many options, you’ll be that much more likely to find a great fit for your clients.
And similar to long-term care insurance, life insurance products can be paired with any kind of Medicare coverage, Original Medicare, Medicare Advantage, Medicare Supplements, even Medicare Medical Savings Accounts.
Who are the ideal clients?
Parents with minor children or special-needs adult children, adults who own property together, elderly parents who want to leave money to adult children who provide their care, young adults whose parents incurred private student loan debt or cosigned a loan for them, young adults who want to lock in low rates, wealthy families who expect to owe estate taxes, businesses with key employees… those are just a few of the more common examples, but as we said, there are many different products, as well as various use-cases.
Life insurance choices also depend on the stage of life your client is currently in. Your client’s needs will change over the course of their life as they move into new phases.
For single adults, term life insurance and cash-value life insurance make sense to recommend. It can cover the cost of unpaid college loans, credit card debt, a mortgage, or a funeral. And purchasing while your clients are young means lower rates.
For newlyweds, a term life insurance policy is still viable, but a term or permanent life insurance combination product might be good, too. Combining a household means sharing income, but it also means sharing debt in case of death. A life insurance policy can also help if one or both spouses find themselves caring for an aging parent.
What if those newlyweds have a child five years down the road? Term life insurance and riders covering a disability or critical illness can protect against the loss of a parent, making sure that bills can be paid until the child becomes an adult. Don’t forget about college expenses, either.
Those parents might want to consider purchasing coverage for their children, like traditional whole life or index universal life products.
The business owners we mentioned in our earlier example. Key person life insurance is a good recommendation, along with a cross-purchase agreement so the owner’s family isn’t responsible for business debts upon their death.
What about clients who are recently divorced? Term Life Insurance can cover court-mandated child support payments, and additional term or permanent life insurance can cover the needs of additional children or stepchildren should your client remarry.
Coverage needs can also change when all your client’s children have left the nest. Whole life policies and permanent products with long-term care riders are ideal for empty nesters.
And once those empty nesters have retired, a permanent life insurance policy could provide income replacement for a surviving spouse, or even a legacy to pass on to their children and grandchildren. Retirees may also want to purchase a lower death benefit policy to cover their funeral costs.
There are life insurance policies that will work well for every different stage of your clients’ life, as well as their individual needs. Fact-finding is a crucial strategy, because as you ask questions and learn more about your clients, you’ll be able to recognize more opportunities for cross-sale presentations.
Here at Ritter, we offer resources and training for Traditional and Juvenile Whole Life as well as Final Expense insurance. And as I mentioned earlier, we partner with experienced specialists to offer Term Life, Universal Life, Indexed Universal Life, and Life Settlements.
We help train agents to sell with product-specific sales training that can help you learn how to discuss these products with your clients. We also provide client marketing programs for life insurance and final expense.
Our partnership with highly knowledgeable product specialists gives Ritter agents assistance in running quotes and illustrations; you’ll get help with product comparisons and new business case management. We also provide live training webinars hosted by our team of product specialists every month.
You might be an independent agent, but that doesn’t mean you have to do this alone. Life insurance might be a new product for your portfolio, but we’ve got a whole team here that would love to help you as you embark on this new path.