Term has long been known for providing the most protection for clients' premium dollars -- and industry sources indicate that it is positioned for future growth. According to LIMRA's MarketFacts Quarterly, term production "is expected to stay level through 2012, with an increase in 2013 and continuation in 2014." In today's economy, and particularly with price-sensitive clients, the affordability of term products presents ripe opportunity for agents focused on offering value.
Term in 2011
Today's term products are not yesterday's. A number of factors, including increased reserve requirements, capital issues and tightening of reinsurance, have resulted in the substantial redesign of many term products. New products and a steady demand for value warrant a quick review of features to look for in two related types of term products: level-premium and return-of-premium (ROP) term.
Savvy agents should consider level-premium term products that offer:
- Flexibility: some carriers offer more than a dozen choices of level term durations, up to 30 years. Greater flexibility allows clients to better match their coverage with their needs.
- Issue ages and durations that make coverage available into the mid-80s for older clients.
- Electronic rate quotes that enable quick response to clients and help shorten the sales process.
- Additional death benefit options that can provide beneficiaries with a lump sum benefit along with a guaranteed income stream to match immediate and future needs.
- Face amounts beginning as low as $100,000
- Convertibility to ROP Term; fixed; indexed; and guaranteed UL products to provide clients with an array of options as needs change.
- Optional riders, such as for accidental death, disability income and waiver of premium.
Why sell return-on premium?
ROP term is designed to let clients have their cake and eat it, too. ROP term offers a combination of security and flexibility that provides guaranteed protection now and money back later. These products can be a compelling solution for families and small businesses that may need to liquidate debts, provide a source of income, replace a key employee or fund a buy-sell agreement.
Look for ROP term products that give clients the opportunity to:
- Surrender the policy for cash value at a guarantee equal to the cumulative base premiums paid at the end of the level term period
- Convert to permanent life insurance coverage at any time during the level term period (to a maximum conversion age) without evidence of insurability
- Stop paying premiums during the level term period and transition to a reduced paid-up policy that will endow for the reduced face value at a specified age
- Continue coverage beyond the initial level term period by paying annual renewable term premiums and continue to build cash value, creating an endowment benefit (at a given age) equal to the face amount of the policy.
Shopping for carriers
When considering carriers for these types of products, look for companies that have established themselves as leaders and innovators of products and services for you and your clients. These carriers help make the sales process easier with features like automatic quoting, electronic processing and express underwriting. Their investments in product, service and processing will ensure a positive experience for you and your client both before and after the sale.
According to LIMRA's recent Life Ownership Study, half of all U.S. households admit needing more life insurance, and a quarter say they will probably purchase it in the next year. Not all of them are going to buy, of course -- but that's tens of millions of potential clients for agents focused on providing as much value as possible for their client's premium dollars. In today's market conditions, Level-Premium and ROP term merit strong consideration as ways to accomplish that goal.
Tim Heslin is vice president, life product manager, for American General Life Companies. He can be reached at Tim.Heslin@aglife.com.
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