When prospecting for term business, a lot of producers focus on family sales. They look for young, middle-income families who usually have one financial planning objective in mind -- to buy life insurance as cheaply as possible. There's no doubt term insurance fits that bill. But when prospecting for term business, don't forget to look upscale -- to the small business owner.
Whether they recently have started a business or are third-generation entrepreneurs, small business owners work hard to build and maintain their business. They don't want to leave it, their family, or their staff unprotected. They also have multiple financial planning needs -- collateral for a bank loan, funding for a buy-sell agreement, coverage for key people, and so forth. For all these needs, life insurance can meet the objective.
"Sure, life insurance is the right product," the reader may be saying to himself or herself. "But why term? Why not sell permanent insurance with all its cash value growth and tax deferral advantages?" The answer is simple. We're not selling products. We're selling solutions.
Needs-Based Selling, Problem Solving, and Relationship Building
We hear a lot in our business about needs-based selling. The central premise is that a prospect has specific needs that can be satisfied by an appropriate product or service. It's a good concept, and pretty simple, really. A producer merely has to discover the prospect's need, then fill it. But, in my view, our role as trusted financial advisers goes far beyond simply identifying and filling a need. We must address a critical third step in the selling process: problem-solving.
More often than not, I find that my prospects need help solving problems or answering questions. What kind of insurance is the best buy for their needs? How much is enough? Is their old plan still right for their current needs? What about their future needs? And, of course, from where will the premiums come?
When I help my prospects find solutions to these problems, they see me as a trusted adviser. This cements our relationship more than any product sale ever could. In fact, after I've helped a prospect find the answers he needs, the sale comes almost as an afterthought.
Profile, Quantify, and Solve
Like a good detective, I begin by collecting information about a prospect and creating a prospect profile. When I talk with my prospect, ask questions, and analyze financial records, I learn a lot about how he handled financial planning in the past. This helps me uncover potential holes in the financial plan. More important, I begin to understand the real, personal issues at the core of those financial needs. I hear things like:
o "The next 10 years will be critical to the success or failure of my business. What kind of protection do I need for my family and my business during this uncertain period?"
o "My employees are essential to my success. How can I reward them without hurting my bottom line?"
o "What happens to my family and my business if I become disabled or die prematurely?"
More often than not, I find that small business owners are as concerned about protecting their families and employees as they are about growing their business. And they want to create a plan that will enable them to do so. After all, the entrepreneurial spirit that drove them to start a business in the first place is the same spirit that makes them want to take a proactive approach to financial planning.
But this benevolence can cause anxiety, too. I hear prospects say things like, "I want to do what's right for my family, my employees, my business. But how can I afford to protect so many and so much?"
The next step in my process, then, is to help my prospects quantify their needs. I do that by talking with them about the human life value for their loved ones and their business associates. It's a matter of breaking down the picture -- which sometimes can seem overwhelming to a prospect -- into more manageable, more quantifiable pieces. This also is a great time to talk with the prospect about his income and expense ratio.
Income, Expenses, and Premiums
I met a 38-year-old radiologist a couple of years ago who was making $200,000 a year, and spending about the same amount. He knew he was underinsured for disability income and life insurance, but didn't know where he could find extra dollars to pay premiums. As we reviewed and quantified his insurance needs and his expenses, it became clear that the radiologist had about $500 of expendable monthly income that he could contribute toward insurance premiums. So, for $300 a month the physician bought a DI policy, for an additional $130 a month he bought a $2 million term insurance policy, and he still had $70 left over for a round of golf.
It's not unusual for younger prospects to have equal amounts of annual income and expenses. But going forward, they're likely to find that their income considerably outpaces their expenses. Take my radiologist: Two years ago when we met, he earned and spent about $200,000 each year. Now he's 40, a partner in his practice, and earning about $400,000 a year.
Why Term?
As we all know, term insurance gives the most protection for the least amount of money -- it's the most economical coverage prospects can buy. A 40-year-old male who meets healthy lifestyle guidelines (including non-tobacco use) can purchase a $250,000 death benefit for only $323 a year. Numbers like these are especially important to the small business owner who is trying to manage and protect so many interests, including his family, his employees, and his company. But, like my radiologist, the young business owner of today may well become the upscale, successful entrepreneur of tomorrow. Therefore, it's critical to show a prospect that term can offer him much more than low-cost protection. It offers convertibility, which can be an essential part of his long-term financial plan.
Affordable, Convertible Term
When recommending term insurance to my prospects, I always illustrate a product that offers competitive conversion credits, and I explain how these credits make term insurance a win-win purchase. With the purchase of a term insurance product today, my prospect obtains the low-cost coverage he needs for the short term. And he maintains the right to convert that coverage -- with premium credits -- to the permanent product he's likely to need in the future.
Circumstances can change quickly, and no one understands that better than small business owners. The producer should help his or her prospects see that, just as their business needs can change as a result of economic or market shifts, so their life insurance needs can change over time. Term insurance can be the right option today because of its affordability, and its convertibility can make it the right choice for tomorrow.
