Utilizing new product innovations to meet client needs
by Tim HeslinMr. Heslin is Vice President, Product Strategy and Implementation, for AIG Global Consumer Insurance. He can be reached at [email protected].
According to a recent LIMRA news release, term life insurance premium rose 3 percent in 2013, with half of the term writers increasing their sales. While a 3 percent increase may not signal leaps and bounds achieved in narrowing the gap between the number of consumers with life insurance and those without, the term life market appears to hold potential for growth.
Advisors and agents who educate clients about flexible term life products with innovative income riders, designed to help meet key needs, have the opportunity to provide protection and peace of mind.
Let’s explore why now appears to be an opportune time to sell term life products. First, we know from LIMRA research that 85 percent of consumers agree that “most people need life insurance,” yet many say they don’t know how much life insurance or what kind to buy. How many people might stand to benefit from a comprehensive needs analysis and how many might be appropriate prospects for a term life policy?
Consider, too, clients who already have term coverage. How many have welcomed a new baby, taken out a mortgage, earned a promotion with a higher salary, become divorced or widowed, retired, or experienced another major lifestyle transition that might translate to the need for more term life coverage? The number may be significant, given LIMRA’s findings that the average U.S. household with life insurance only has enough to cover 3.5 years of income and that 58 million (half) of U.S. households already say they need more life insurance.
If those households are relying solely on employer group coverage, they may lack sufficient life insurance to cover their income-earning years. What’s more, as the American Council of Life Insurers has pointed out, “Life insurance provided through an employer is most commonly term insurance. When an employee leaves, coverage is terminated.”
While the consumer may reside in a state that requires a conversion privilege (which allows employees to convert their policy to a permanent life policy when they exit their job), the typically higher premiums for permanent life contracts may deter some people from purchasing a policy.
During challenging economic times, however, term life represents true value: the highest death benefit for the dollar. This type of coverage can be appropriate for clients who have been laid off, who have changed jobs, or who have started their own business.
Of course, premiums vary, and depend upon a number of factors, including the length of the term, but they typically are more affordable than permanent life policies. What’s more, a term life policy can provide a safety net to help cover potential expenses until sufficient funds are available from savings to protect one’s beneficiaries.
For example, a younger client might purchase a policy whose term expires close to his retirement age, based on the assumption that by retirement, his retirement savings will be sufficient to provide for his family. On the other hand, for clients who may have intended to retire soon and rely just upon their personal savings – only to see those savings take a major wallop – term life can help ensure that their family’s standard of living will be preserved if death occurs before the retirement fund regains its value.
A term life policy can help bridge the gap and at affordable rates, even for coverage that is procured later in life. While it hasn’t always been easy to buy a quality term life product beyond age 55, it is possible today for people in their 50s, 60s and even 70s to find quality coverage. Also, premiums for term life have generally decreased while options, such as term lengths, have in some cases increased – and innovative new riders have become available on certain products.
One such rider currently on the market, in conjunction with a term life policy that’s available in a choice of 17 durations (and which must be issued simultaneously), can provide a guaranteed monthly income for a specified period of time in addition to a lump-sum death benefit. This select income rider pays a monthly benefit of $500 or more for as few as five years, and up to 40 years, upon the death of the insured. Keep in mind that all guarantees are backed by the claims-paying ability of the issuing insurance company.
That’s good to know because while a lump-sum death benefit is vital, so too is managing monthly cash flow, should a family lose an income-earning parent. After all, most people live on incomes, not lump sums.
Let’s face it: It’s easy for families to find themselves overwhelmed at the prospect of losing a loved one, then trying to manage a very large sum of money from a life insurance death benefit. A lump sum can help pay off a mortgage or cover a child’s education expenses, but for ongoing expenses, a regular monthly payment may be far easier to manage.
That’s why the type of guaranteed income rider described above, combined with a highly flexible term life policy, can be appropriate for certain clients. This planned approach to protection is affordable, simple to put in place and provides extra peace of mind to help ease the burden of money management.
This approach may also be particularly attractive to Gen X and Y prospects, who may not be in the market at present for a permanent life policy, but who typically have 20 or more years of savings ahead of them. They have the potential to some day enter the ranks of the affluent or high-net worth segments, and developing a relationship with them now by helping them understand the important role that life insurance can serve may provide opportunities for business growth over the long term.
I would venture to say, however, that as long as the focus remains first and foremost on meeting client needs – whether through a highly customizable term life policy with a guaranteed income rider or through another type of product as appropriate – the business of growing one’s business may largely take care of itself.
AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. All products and services are written, issued and/or provided by insurance company subsidiaries of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange. Guarantees are backed by the claims-paying ability of the issuing insurance company and not by AIG.
Additional information about AIG can be found at www.aig.com
1 “LIMRA Reports Individual Life Insurance Sales Flat in 2013”, LIMRA, March 13, 2014, accessed April 15, 2014 at http://www.limra.com/Posts/PR/News_Releases/LIMRA_Reports_Individual_Life_Insurance_Sales_Flat_in_2013.aspx
2 “Insure Your Love”, LIMRA, 2014, accessed April 15, 2014 at http://www.limra.com/uploadedFiles/limra.com/LIMRA_Root/About/Insure-Your-Love -2014.pdf
3 “The Facts of Life and Annuities”, LIMRA, September 2013
5 “Types of Life Insurance Coverage,” American Council of Life Insurers (ACLI), accessed April 15, 2014 at https://www.acli.com/Consumers/Life Insurance/Pages/Types of Insurance.aspx