You already know the benefits of term insurance, one of them being its lower cost when it comes to covering a larger temporary need. Term insurance helps your client to maintain their same standard of living by providing income replacement, and even paying off existing debt. So far, pretty impressive.
However, if you have a client with term insurance, it is important to reach out and review their needs on a regular basis. In fact, you will want to contact your client long before the term insurance is available for renewal – giving you and your client adequate time to evaluate their needs and review all of their insurance options.
Below, are a few of the things that you will want to consider when your client’s term insurance comes up for renewal.
What are your client’s needs today – Have you completed a recent Insurance Needs Analysis (INA) with your client? It’s quite likely that some of their life circumstances have changed since the plan was first put into place. Performing and INA will let you know if they still require their existing insurance as well as if the coverage they currently have is enough. Additionally, if your client has incurred more debt since purchasing their plan, they may need more coverage to include these needs. Book some time with your client and use PPI’s Insurance Needs Analysis applet on Toolkit Direct to determine what they need moving forward (Advisor login required).
Does your client have estate goals – Is your client’s insurance need still a temporary one? If they have eliminated their mortgage debt and no longer need income replacement, perhaps their needs have changed to be more permanent. It’s up to you to have a conversation with your client and determine what they need from their estate as well as things to consider such as final expenses, tax liabilities, capital gains, inheritance and charitable donations. In this case, you may want to shift the focus of the conversion towards the required amount; one option is a partial conversion to tackle their estate while reapplying for a new term to cover their remaining temporary need.
The health of your client – If your client does opt to reapply for a new term, they can do so with their existing carrier or a new one. As you know, the purchase of life insurance becomes a little more challenging with older clients – our health tends to falter as we get older, making underwriting more complicated. Again, it is up to you to do your homework – check the varying underwriting guidelines and even confer with an underwriter, especially when it comes to those trickier cases. You may even need to set the expectation of a rating or approaching a simplified issue carrier that specializes in substandard risks. There are still lots of options for those hard to insure clients.
The Cost of Waiting – Beware of the term cycle-loop. It can seem easy enough to just replace the exact same coverage with another term solution, but this is really just delaying the inevitable. At some point, your client will need permanent insurance and the older your client gets, the more expensive it will be to convert their existing insurance. Moreover, it’s important to revisit the topic of term insurance with your client on a regular basis and discuss the difference between and benefits of permanent versus term insurance. Your client may even prefer a combination of the two, so they do not have to worry about the high costs of conversion later.
The nutshell? Term insurance has many benefits and can be helpful to your client on a temporary basis when it comes to income replacement and paying off debts. However, when your client’s term insurance comes up for renewal, you have the opportunity to reassess their current needs and advise them on more permanent solutions – solutions that will grow with them and provide for a more secure future.
To learn more about term insurance and renewals, contact your local PPI office.