Term Insurance Sales Techniques

Term Insurance Sales Techniques www.LifePro.com More people than ever need term insurance, so you should learn to be efficient in its sale. Term insurance enables many people who otherwise could not afford it to buy a sufficient amount of life insurance to ensure their family will not suffer financially should they die. What kinds of term products are selling best now? What are the best ways for the producer to approach this large market? We are delighted to share the following comments from producers, wholesalers, and home office executives who have proven their expertise in marketing term insurance. Dave Brogan, CLU, ChFC, is a 48-year Ohio National career agent based in Lansing, Mich. Mr. Brogan is a 38-year qualifying and life member of the Million Dollar Round Table (MDRT). His best term prospects often are young professionals or business people with young families. He does a brief needs analysis to determine the amount of capital that will be needed to provide adequate income for the family. For example, $2 million of life insurance proceeds invested at 5% interest creates $100,000 of income a year. Although $2 million of coverage sounds like a lot to many people at first, when discussed as the income it would provide a family, it is not excessive. Mr. Brogan develops most of his clients from groups of physicians, attorneys, accountants, and personal contact with local businesses. Some of his sales are a combination of term and universal life insurance products. "I point out to clients the importance of adequate coverage now to protect their families," he says. If their incomes permit, he also encourages clients to make a portion of their coverage permanent life insurance. Mr. Brogan tells clients and prospects that he never has had a widow ask him what kind of insurance her husband had. Nor has he had a widow tell him she thought her husband had too much insurance. "I generally sell either 10-, 15-, or 20-year level term insurance policies with guaranteed level premiums for the full term period," he says. All the coverage is fully convertible to permanent insurance, and Mr. Brogan uses the enhanced conversion option that allows conversion to any product his company has available. "Almost every term insurance policy I sell is sold with the expectation that all or a portion of it will be converted at some point," he says. "I attempt to set that thought in my client's mind right from the beginning." Mr. Brogan often shows both term and universal life quotes at the initial sale, and indicates that he will stay in touch and review the conversion option periodically. Early in his career, a close friend of Mr. Brogan's bought a $10,000 whole life policy from him. A few years later, after the birth of this man's first child, Mr. Brogan suggested that his friend needed an additional $10,000 policy. "He and his wife were not sure they needed it as he had some group benefits," says Mr. Brogan. "Besides, they contended, she was a teacher and would be able to teach if her husband died." They moved 200 miles away and had two more children. Mr. Brogan received a call a few months after the birth of their third child, and was told that his friend had died of an aneurysm on his way to work. Mr. Brogan says, "Needless to say, my friend did not have adequate insurance. His widow tried to teach, but found it difficult to raise her three children and work a full-time job as well. It was clear to me that a sizeable term policy would have met their needs much better than a lower face amount whole life policy." Mr. Brogan has used this example for many years as motivation to ensure his clients have adequate coverage. If term insurance meets a prospect's initial needs, that's what he sells. He also uses this early experience as a reason to approach all friends. "While I use a low-key approach," Mr. Brogan says, "it eases my mind in case the unthinkable happens and a friend dies. I want to be sure that I attempt to sell them the right products designed to protect the needs of their families." Scott Menta, ChFC, CFP, CLU, a MetLife agent from Elmsford, N.Y., believes term insurance will continue to be sold as a commodity unless the producer can demonstrate that he or she delivers additional value. This additional value can be found in the design of the product, efficient underwriting, or the high quality of the producer's advice. "Most term buyers," Mr. Menta says, "don't realize they'll need life insurance later in life. That's why it's the agent's responsibility to be the advocate for the families and help clients understand the importance of buying a product with high-quality conversion options." Mr. Menta works to help buyers understand the product's convertibility period, and the kinds of permanent products to which their term insurance can be converted. The most attractive policies, he says, allow conversion to any kind of permanent product, including whole life, universal life, or variable life. It is critical, he says, that producers talk to their clients about buying high-quality term products that offer a range of value-added riders. Riders can be added, for example, that guarantee the availability of long-term care insurance later in life, or pay for coverage in case of disability. Mr. Menta believes producers should recommend the appropriate amount of coverage. Studies have indicated that families with children need 15 to 20 times their income, but the average family covers only 2.5 times their annual income. Mr. Menta helps solve this problem by using the Human Life Value approach, which calculates the value a person brings to his or her household over the course of a lifetime. By using this method, he says, the producer makes sure that the client knows the ideal coverage level that will ensure his family won't suffer a reduction in living standards after the client's death. Matt Woodson, Life Brokerage Director for Zenith Marketing Group, Inc., Charlotte, N.C., and Mark Milbrod, CLU, Life Brokerage Director for Zenith Marketing Group, Inc., Manalapan, N.J., believe that a good wholesaler assists the producer's term sale by treating it as more than a transaction sale. The wholesaler, they say, needs to know the long-term goals of the producer's client to determine which carrier or product will provide the best benefit. All term insurance is not created equal, they say, because convertibility features, available riders, and financial strength are all factors that shouldn't be overlooked when determining the best fit for the situation. The wholesaler's knowledge of the product features, strengths, and weaknesses saves the producer time doing research, expediting and simplifying the sale. Using good field underwriting from the producer, the brokerage wholesaler can pinpoint the best product and carrier before an application is taken. After an application is submitted, a wholesaler can facilitate the medical requirement process by ordering the necessary exams and attending physician statements, being proactive with the carrier to get a policy issued in the shortest amount of time, and keeping the producer up to date on the status during the whole process. By far, the biggest surge of sales Mr. Woodson and Mr. Milbrod are seeing now is with return of premium (ROP) term insurance. In many instances, they say, when given a choice, clients are willing to pay a higher premium knowing they're getting something back at the end of the term period. This is especially true in business situations that call for buy-sell agreements. They also are seeing conservative-minded business owners using ROP term for executive bonus plans. Greg Bailey, vice president of marketing at Financial Brokerage, Inc., Omaha, Neb., believes the wholesaler can be the "knowledge bank" for the producer. From carrier ratings, to detailed product features, to commission schedules and pricing, he says, "The wholesaler can and should assist the producer in finding the best product and carrier possible for their client." To this end, it is important that the wholesaler have several high-quality term insurance carriers in its portfolio. In a recent case, a producer was interested in a 10-year term insurance plan for her client. "Many of us," Mr. Bailey says, "would take the easy street to the predestined conclusion -- quote the lowest cost, highest commission combination for the producer to sell." Rather than taking this easy route, they recommended a return of premium term insurance plan for a portion of the death benefit needed. For the remaining portion of the death benefit, a high-quality universal life plan was proposed. At the end of the 10th policy year, this client will get back 100% of the term insurance premiums from the insurance company. The client then will have the choice to "dump in" that amount of money to a universal life plan -- which will enable the client to maintain life insurance past the initial 10 years. Mr. Bailey believes that the producer and wholesaler should share the responsibility in creating future options for clients and their beneficiaries. Michael C. DiPiazza, CLU, vice president of marketing, life operations, MONY Life Insurance Company, says the term insurance market has been growing, and he believes that it will continue to grow for two reasons. First, the Internet will continue to expand the reach of term insurance promotion and merchandising. And second, continuing reductions in price will make the product more affordable across the economic strata. "Lower economic strata," he says, "will find life insurance protection finally affordable within their family budget. And, at the higher end ... well, there just will be no excuse for not getting that extra million of protection in place." Producers will be able to ask some of their prospects, "How can you afford not to address that additional need when it is addressed with such a modest premium?" Mr. DiPiazza believes producers must determine the role term insurance plays within their "product mix." If term insurance will be a producer's lead or primary product, then he or she will have to stay on top of the game, tracking the monthly changes among the price leaders to make sure the product quoted is always among the price leaders. The producer also needs to think about means of mass distribution, because earnings per sale will decline as the price continues to drive lower and lower on an already low premium. On the other hand, the producer might consider pursuing only those market segments where there is a reasonable potential to convert the term insurance he or she sells into permanent insurance. In other words, the reason a producer offers term can be to "warehouse" prospects for a future conversion to permanent insurance. For these term buyers, the quality of the carrier and the permanent products available on conversion can justify a reasonable "premium" over the lowest price term competitors. "This approach," Mr. DiPiazza says, "can build a client base that, over time, can generate increasing commissions through conversions without increasing the time invested at work -- but the conversion takes time to sell." Doing it the other way, he says, means the producer will have to work harder and harder each year to maintain the same level of earnings. Joseph Sullivan, senior vice president and chief marketing officer for Banner Life, and president of William Penn Life Insurance Company of New York, believes that companies with brokerage distribution systems continue to offer the overall best value for the money. Most of the agencies that represent Legal & General America, he says, are members of the National Association of Independent Life Brokerage Agencies (NAILBA). Mr. Sullivan notes that term life sales were slightly better than those of other life insurance products in 2003 but were up only marginally over 2002 sales. Term insurance now represents approximately 23% of all new life insurance premiums (although the percentage is much higher when measured by face amount or policy count). In a low interest rate economic environment, more people have chosen term insurance to protect their families' financial needs. The low interest rate environment also puts extreme pressure on the crediting rates of permanent plans. "I advise agents never to forget that life insurance still is a product that is sold, not bought, and to recognize that there are no easy ways to prospect," he says. If the producer performs an honest, rigorous needs analysis, many times the only affordable product choice will be term insurance, because the face amount will be quite high, making permanent insurance for the full need too expensive. "From a compensation perspective," Mr. Sullivan says, "commissions often will be the same as on a 'scaled down' permanent product." www.LifePro.com This article originally appeared in LIFE INSURANCE SELLING 6/2004, and is reprinted by permission. Copyright 2004 Pfingsten Publishing LLC.