Life insurance is a critical decision for everyone, and deciding between term life, whole life, variable life, and universal life is a challenge. As an insurance agent, your job is to try and place each client in their ideal coverage scenario. How do you match up a client with the perfect life insurance policy? How do you make them confident and comfortable with their purchase?
Over 54% of all individuals in the United States own life insurance, and the national life insurance market exceeds $909 billion in premiums. It's a vast market for you to tap, but you need to deliver the best service possible. Let's take a look at how you can make sure every customer gets the life insurance policy that meets their needs.
When selling life insurance, your first and most important goal should be to empower your customers with education. It's a confusing landscape, and customers are often unsure about the various types of life insurance and how they differ from one another. As you go on this journey with each client, and as you learn more as an insurance agent, you can begin to match up customers with the right insurance offerings.
The term life insurance policy is the simplest of all life insurance policy options. With a term life policy, your client will pay a set premium over a set period. The average period of time for a term life policy ranges from 10 years up to 30 years. If the owner of the policy dies during the coverage period, the beneficiary listed on the policy receives a payment.
Key details customers must decide on as part of any term life policy include:
Term life insurance policies are fairly simple, but walking a client through this option is valuable for any insurance agent.
The ideal customer for a term life insurance policy will be someone who just began their career. Anyone between the ages of 18 and 65 is a candidate for term life insurance. A younger client, though, can use a term life insurance policy to get into the insurance market and plan out the future of their family. Any client younger client with young children should protect their home and family’s future with term life insurance, at a minimum.
Whole life insurance is permanent. When your client buys a whole life insurance policy, they are gradually funding a permanent death benefit. With a term life insurance policy, the policy benefit ends when the term ends. With whole life, the policy remains in place until the insured dies.
The biggest benefit of whole life insurance for your clients is that, on top of paying out a death benefit, it serves as a savings tool. When your client buys a whole life insurance policy, they pay in a regular premium amount. They can also pay more than the premium amount, adding to the cash value of the policy. The cash value, which grows over time, will earn interest on a tax-deferred basis.
Think of a whole life policy as a way for your clients to build equity. They can tap into their equity or cash reserves if necessary or take a loan against the funds. This is all possible up to the total cash value of the policy, which builds over time. Of course, it's also much more expensive than term life insurance, so the price will be a major consideration for your clients.
Many customers balk at the idea of paying for term life insurance and getting nothing in return in the long run. Those who don't love this idea may be looking for long-term protection for their family in the form of a whole life policy.
Clients seeking long-term protection could include business owners or individuals seeking to grow their investment portfolios. With a whole life policy, your clients can pay in premiums and build equity over time. It is an investment vehicle with a permanent death benefit in the end. Premiums are higher, so for younger folks building savings and trying to get their family started, whole life may not be ideal. Typically a whole life customer is someone with the ability to pay beyond basic premiums and take advantage of investment growth opportunities.
Variable life insurance policies provide each client a death benefit that could build over time. With a variable life insurance policy, your clients will agree to pay premiums into an account. These premiums are then invested into various accounts. Your clients can choose to invest the money into a variety of investment options or set up fixed-rate investments.
Fees come out of the monthly payments, and the excess is what will be available for investment. As time goes by, in theory, the cash value of the account will increase. Although your clients can take loans against the policy or withdraw funds, having an inadequate cash value will cause the policy to lapse.
There is also a death benefit component to a variable life insurance policy, and your clients choose it at policy inception. They may select the face amount, which is a set death benefit amount, or the face amount plus cash value. The face amount is the main driver of the premium cost for these policies.
You will also encounter clients who are much savvier when it comes to equity and investments. These are the ideal clients for a variable life insurance policy.
Customers who have a lot of knowledge and comfort in this arena may find the controlled investment component of a variable life insurance policy appealing. There are so many options in play with investing to grow the cash value of the account, and savvy investors enjoy this opportunity. Clients who don't want to think in depth about how to invest and manage their life insurance policy won't be a good fit for variable life insurance.
Universal life insurance is another type of permanent life insurance. As long as your client continues to pay the premiums on the policy and meets any other requirements set out in the policy documentation, coverage will remain in place for the duration of their life. Just like other types of permanent life insurance, there is a savings or cash value component to a universal life policy. Cash value, interest, and investments are all status quo for universal life, similar to variable and whole life insurance.
There are a few interesting nuances with universal life insurance. The first is that your clients can adjust the death benefit of the policy. Assuming they pass a medical exam, they can increase or decrease their death benefit over time. The flexibility here is appealing for many people.
In addition to altering the death benefit, it's also possible to change premium payments. If the cash value of the policy increases enough to cover the death benefit comfortably, clients may be able to lower premiums or even stop paying them for a period.
Universal life insurance is a great tool for your clients due to the flexibility it provides. Many clients face unexpected life changes over the decades while holding their universal life policy. What they thought was a fine death benefit at the start may not suffice later on. A universal life insurance policy gives them the ability to make that adjustment. The ideal universal life customer will be savvy with investments and in a position where they know they may need to change their death benefit or premium over time.
As an agent, your goal should always be to sell the perfect life insurance policy to each client. It's not about what will net you the highest commission, but what will make your client feel happy and secure.
Each of your clients has their own needs and desires for protecting their family, and these may change over time. No one wants to die and leave their family with nothing. Life insurance is there to provide the insured and their beneficiaries with peace of mind. As an insurance agent, it's your job to help them achieve that.
Looking for a way to connect to more life insurance prospects? Nectar provides insurance agents with real-time, targeted life insurance leads who are interested in buying right now. These leads are something you can even narrow to specific criteria to home in on ideal clients. Use Nectar to identify get more insurance leads and begin finding the right policy for every new customer today.
This article reflects the features of Nectar as of the date of publication. Features are subject to change at any time. This article is meant for informational purposes only, it is not a guarantee that using Nectar will help you achieve specific business or financial results and is not intended to serve as the sole recommendation for any business financial decisions.