As any agent or advisor will admit, it can be difficult to explain the full gamut of life insurance products to potential and current clients. This is one of the reasons term life insurance has emerged as the go-to product for many producers. It’s easy to explain. Clients are comfortable with its simplicity, and the price point is attractive. In fact, according to LIMRA, more than 50 percent of carriers wrote more new term premium in the first quarter of this year than they had in the first quarter of 2011.
But even though more people are purchasing term, Gen X and Gen Y are purchasing it later in life than earlier generations. LIMRA research shows 30 million people in the Gen X and Y age group — nearly half of the generation’s household population — need more life insurance. Not only do the people in these markets purchase term life insurance later in life, they are also getting married and having children later than past generations.
Gen Xers (born 1965-1980) present the greatest opportunity when it comes to term life insurance today. According to LIMRA, 61 percent are married, and 62 percent have children under the age of 18. Gen Xers who have purchased life insurance have a higher average amount of coverage than other generations, making them an ideal sales target. And the Gen Y market (born 1981-1992) represents the greatest future opportunity for term life. On the whole, they appear to be more fiscally responsible than previous generations, as 46 percent have an existing budget and actively save money, compared to 36 percent of the general population.
Get creative with term life insurance
But even after pinpointing the most receptive clients in terms of demographics and particular stage of life, there is still a lot to be done to influence term life purchases. You can more easily capitalize on this growing market if you’re able to educate clients about how term life insurance can be used to meet specific needs. Here are some creative term life sales ideas to get you started.
Bundle term with permanent: Make the total premium outlay affordable by using a combination of term and permanent products to cover the client’s protection need. According to LIMRA research, only 1 in 10 insured adults owned both permanent and term insurance. This statistic underscores the perm/term bundling opportunity when it comes to expanded offerings for clients.
Ladder term products: Coverage requirements change throughout every client’s lifetime, and many times the changes are predictable — paying college tuition, purchasing a new home, etc. To capitalize on predictability, choose varying level term period plans to meet the total needs of the client. For example, let’s say your client needs $1 million in life insurance right now, but her children finish college in 10 years, her mortgage will be paid off in 20 years and her new vacation home will be paid-up in 30 years. Recommend your client buy a 10-year term policy for the cost of college tuition, a 20-year term policy for the amount of her mortgage and a 30-year policy for the amount of her vacation home. The total premium payout is significantly reduced, and the insurance plan will automatically adjust as the client’s needs and life stages change.
Leverage term as a conversation starter: Term insurance is the easiest channel through which to establish the advisor/client relationship. It represents a less complex sale and allows the client to become comfortable with the agent/advisor. This is especially important for Gen Y. Gen Yers place a strong emphasis on the relationship they have with their personal agent or advisor, and they don’t want to feel pressured in any way, especially by someone they don’t know. Instead, they’re looking for a trusted source to help educate them on the uses of life insurance and the suite of products available. This opens the door to talk about term life today — and permanent products later in the relationship.
Utilize return of premium: Return of premium products appeal to Gen X and Gen Y because at the end of the term, if a claim hasn’t been paid, the premium is refunded. These are the same generations who have grown accustomed to vanishing deductibles in auto insurance. They’ve come to expect this type of service across all insurance products. This is especially true among the Gen Y set, who list being able to save and pay for a child’s college education as a top priority. They also want to ensure their return of premium provides the death benefit protection they are looking for while also offering a refund to supplement tuition expenses when the policy ends.
Use return of premium in a divorce agreement: Oftentimes, in a divorce settlement, the primary wage earner is required to have a term life policy for a period of time established by the court. Clients aren’t usually happy about this requirement, but a return of premium policy satisfies the mandate while also allowing the client to recover the premium at the end of the period.
Re-evaluate existing term coverage: If a client is healthy and has received a bump in salary or purchased a larger home since making an initial term purchase, it presents a great opportunity to review coverage amounts.
Enter the worksite market: There is a growing trend to purchase term life insurance at the worksite, probably because many carriers offer a guarantee issue amount depending on the size of the employer. Many in both Gen X and Gen Y (21 percent and 22 percent, respectively) are comfortable with, and favor, purchasing life insurance at the worksite.
Add life to your sales plan: Personal lines agents should consider adding life insurance to their existing sales plans. By leveraging existing relationships with clients, agents can easily start discussing the need and importance of life insurance.
Though term life insurance is a relatively simple product, if used creatively, it can help agents and advisors address advanced client needs in a way that is beneficial for all.