As Final Expense agents, we run into prospects that have purchased a term policy to pay for their final expenses from time to time. I believe this is never in their best interest and should be replaced with a permanent final expense policy, but sometimes the cheaper price makes it a difficult replacement scenario and if you don’t know what to say, you will miss out on doing what it is in the best interest of the clients and putting a little commission in your pocket!
First, what is a term policy? Simply put, term is temporary insurance. It is designed to last for a certain number of years, until a certain age or until a person leaves the group (as in Employee group term coverage). Many times, term policies will go up in price every few years or after the level coverage has expired. Because of this, term should only be used for temporary needs, such as a mortgage, car loan or income replacement when young children are in the home.
As Final Expense agents, we help families offset the cost of burial and final expenses using Whole Life insurance. We sell a permanent product because we sell GUARANTEES! We also work with low income prospects who cannot afford their life insurance to go up in price. We do not want any of our client’s insurance policies to expire before they do. The Indiana Department of Insurance says less than 2% of term policies ever pay out, because clients either outlive them or the price goes up so high they cannot afford it anymore.
Yet on a weekly basis we will run into prospects that currently have term insurance. Many of them do not even know that they have term insurance and just picked that plan because of the price. That is the real issue most of the time. Term is almost always going to be cheaper than the equivalent Whole Life policy. Make sure you explain this as you present. This will help our clients reset their expectations on price. Seeing how our clients are very price conscious, how do we replace these types of policies when we see them in the field?
Replacing term policies starts from the moment you enter the door. As with any replacement, you need the prospect to like and trust you enough to listen to your recommendations. They need to believe that you are the expert. Some of you may question whether or not you are truly an expert in this field, but I can assure you after passing your life insurance exam and going through just a little bit of training you know 1000 times more about the subject than any prospect you will speak with, especially in the Final Expense market. So as they say, “Fake it until you make it!”
Once you have a good rapport built with the prospect and have found out why you are there, move straight into the presentation like normal. Many times it will come up that they already have insurance and when they mention the carrier, you will know whether or not it is term or not. This will come with time, of course, which is why sticking to the presentation is foundational. If you jump the gun, you will fail to replace these types of policies.
The main part of our presentation is building value in Whole Life. One of the questions I always ask my prospects is, “So tell me, what do you know about the different types of life insurance programs that are out there…the main ones are term life and whole life?” You need to say this without sounding condescending. You need to come off as an advisor trying to judge where your prospect is at so that you can further educate them on the process. No matter what they say, I am always going to explain what term life insurance is and how it works.
There are a few main points that you need to get across to the prospect. First, term is temporary coverage. It does not last forever. Some will cancel at age 70, 75, 80 or whenever, but they WILL cancel and you will lose everything that you have paid in. They will usually also go up in price every few years, such as AARP and Globe Life. I will always mention these two companies in my presentation, because prospects get mailers from them all the time. At this point, I will mention that the Department of Insurance says that less than 2% of term policies ever pay out, because they either outlive the product or the price goes up so high they cannot afford it. I actually saw this in my Continuing Education course one year.
Then I will summarize to the effect that prospects will make these payments until they can no longer afford them or the policy expires and then they will have no insurance at all and will get nothing back. Now they are much older and most likely less healthy and may not even be able to get Whole Life insurance, or even if they can, will now not be able to afford it.
Then I will transition, “This is why we only recommend Fully Guaranteed Permanent Whole Life Insurance.” Then I will pull out my one page Program Guarantees sheet and going over the benefits of Whole Life. If we know they already have term, we are really going to stress the advantages of Whole Life over Term, but it is important to do this no matter what. Prospects only remember 5-10% of what we tell them and by the time we leave they will not remember all of this, but if you don’t stress this point enough, they may receive a mailer from Globe Life in a week or two and see the price is much lower and cancel on you. I would imagine many Final Expense agent’s Not Takens come from a situation like this.
Now that you have built value in Whole Life vs Term, you will need to get a copy of their policy. ALWAYS GET THE POLICY! I don’t know how many prospects have sworn up and down that they have Whole Life and find out they have something different. The prospect is never right! You will run into many different companies that offer term. Most often you will see AARP and Globe Life and a spattering of Primerica and policies written by mainly Auto/Home companies like State Farm and Allstate. These can be broken up into two main categories: level for a certain period of time or until a certain age.
Your Primerica policies will usually be level for 10, 20 or 30 years and then are annually renewable, but the premiums skyrocket once the level period expires. For example, if they were paying $50 a month for a 10 year level period, in year 11 I have seen the premiums jump to $300 a month and then in year 12 jump to $400. At some point it becomes too expensive, usually in that first year once the level period expires.
Any of your 10, 15, 20 or 30 year level term policies will work the same way. Once the term period expires, the rates will become astronomically unaffordable. Yet some companies will still market these products as “semi-permanent” products because they can still be renewed each year, only at the much higher premium.
You will run into these types of policies, but most often you will run into AARP and Globe Life. These are the type of term policies that are level for 5 year bands and then cancel at age 80 and 90 respectively. So they may go up at 55, 60, 65, 70, 75 etc. until they reach the cancel age. Most prospects will have to cancel long before that because they cannot afford the increase in premiums at the older ages.
So now that you know what you will be facing in the field, how do you replace them? As we were saying, you must get the policy and if they do not have it, call the company. You need to show them in the policy that it is a Term Policy. Many times they will not believe you unless they see it with their own eyes or hear it with their own ears straight from the carrier. Call the company!!
Once you have established it is a term policy, you need to sound somewhat depressed, like this is what you thought, but you are horrified that someone would sell this to a senior. The longer I do this and the more horror stories I hear, makes this easier and easier to do. Term really is the money maker for the insurance carriers. They really are taking advantage of the low income seniors, in my opinion.
Once you have established that you are dealing with a term policy, you need to either show them or get the carrier to explain how it works. I love getting the carrier to hang themselves with their own words when explaining the product. For AARP/Globe Life, you need to get them to tell you what the premium will be at every price increase, sounding more and more horrified as the premium goes up with each succeeding price increase. Then get them to admit that policy will cancel at 80/90, sounding flabbergasted that they would ever sell such a product.
NOTE: With AARP and reputable term policies, they can sometimes have the option to convert the policy to Whole Life. If the customer service rep starts to go into this, IMMEDIATELY cut them off, “Yeah yeah I understand how that works…,” and move on. Sometimes if the client is too unhealthy to qualify for new Whole Life coverage, you may have to recommend that they just convert their term policy to Whole Life, but if I’m in the house and it is possible, I’m going be their new agent!
If the prospect has Primerica or another level product for 10/20/30 years, then you would do the same thing, but write down the premium increases for every year after the level coverage expires. If they have Group Term Coverage through their employer, you just need to explain that it will cancel when they stop working or retire. The key is to show them that they are trying to use a temporary product to cover a permanent need. Once you have done that, now we can replace it!
So you need to write down all the premium increases. You don’t necessarily need to write down when the increases will happen, just the increases themselves. I will now say, “Well I was hoping it was Whole Life, but it is unfortunately a term policy(sound sad, we are creating a wedge here!). So right now you are paying $25/mo. (I have this written down and am now showing it to them). Next it will go up to:
$39/mo (then it will go up to)
$112 (And in AARP/Globe Life’s case) “then it will just cancel on you. You won’t get any of your money back, it will just be gone.” (If it is an annually renewable term) “and it just keeps going up and up and up each year.”
“So most people (Jones’ effect: everyone wants to be like someone else) in this situation, will take the money they are already paying toward AARP and apply it, plus whatever extra they can afford, and get themselves some Whole Life insurance. (Note: through the presentation, you will need to be dropping hints that term is much cheaper than Whole Life, that way you are resetting their expectations.)
So currently you are paying $25 a month for your term policy that will cancel someday (if it will soon go up in price, I will say) and it’s going up to $39/mo soon and so you’re going to have to pay that no matter what. So, above and beyond, what you’re already paying, how much more can you afford to put into a Whole Life insurance program?”
Whatever number they give you, that’s what you show them. If they say they cannot afford any more than what they are already paying, I will say, “That’s fine, getting something that will last your whole life is better than nothing. The only reason we see if you can afford more is because Term always starts off cheaper. They can afford it because they rarely have to ever pay out. But you’re not trying to make anyone rich, right? You’re just trying to get your final expenses taken care of. Let me plug that in and see how much Whole Life we can get for you.”
I would still then show them what $25, $32 and $39 would get them, explaining once again that their payment is about to the $39 whether they like it or not and then I will ask, “So, you tell me, which one of these can you squeeze into your budget?” Then once they pick, “Ok who do you want to leave the money to when you pass?” “Ok we will take care of getting everything switched over for you. You won’t have to do a thing (Smile). So you’re last name is spelled M Y N E W C L I E N T?” And then just finish filling out the app.
If presented to correctly, you should replace the term policies you run into with ease. I struggled with these types of replacements when I was new. Remember, as good salespeople we understand that people don’t buy based off of price, they buy based off of value. Many times a lower price is part of that value, but when comparing Term to Whole Life, the price will not matter if presented correctly!