Selling Term: Lowest Cost, Comparable Cost or Higher Cost with More Benefits?
How many advisors are actively selling term insurance? I would venture to say that nearly every insurance advisor has sold a term policy at some point in the past year. While you may not believe term is the ideal solution for your client, the competitive cost can provide essential protection as they build their estate. Therefore, it is important not to overlook term insurance as a vital component of a client’s financial strategy. Additionally, securing a client’s insurability has always been a key benefit of term insurance.
AgencyONE’s case design team has been receiving an increasing number of inquiries about term products. Some questions pertain to additional riders and features, while the majority focus on conversion options and age limits. Currently, there are carrier products with limited or no conversion options that come at a lower price. However, be sure to review term comparison sheets to understand the differences between products. A minimal cost increase may add benefits and therefore enhance value to your client. Let’s explore some sample cases and break down the details from the comparison sheets.
Below are the findings from a $1M 20-year term sheet for a 45-year-old male client, assuming Preferred non-tobacco (NT) status.
- Carriers A, B, C, D, and E all offer a premium of approximately $1,192 per year (with very minor price differences).
- Carrier F shows a premium of $1,199 per year.
All carriers listed have A to A+ AM Best ratings and provide E-App options, with some offering Accelerated Underwriting Programs – AUPs (more details on that later). While you might be tempted to choose the lowest cost option and start the application process immediately, we recommend you and your client explore the solution fully to understand what you are getting for the premium:
- Carrier A allows conversion throughout the term or up to age 70, whichever comes first. They offer a Conversion Specific Guaranteed UL with limited flexibility, priced higher than fully underwritten GUL products.
- Carrier B provides conversion for 18 years, allowing ANY product for the first 5 years, then switching to a product specifically designed for conversions in years 6 and beyond. For a higher cost (increase from about $1,192 per year to $1,492 per year) you can add a conversion extension rider that includes an option for a chronic rider when converted to the permanent product. This option requires advanced underwriting.
- Carrier C offers a conversion option for 10 years to a specific product available in the state of sale.
- Carrier D allows conversion to ANY product for the first 10 years, followed by a conversion-specific option for years 11-20.
- Carrier E does not provide a conversion option at this price on the base term product unless your client purchases an extended conversion rider, raising the price to $1,337 – still competitive among top options.
- Carrier F allows conversion to a conversion-specific GUL for the full 20 years.
These six carriers present varying conversion options, with premium costs closely aligned. If underwriting is similar for all six, which option would be the best choice?
When selecting a product based on price, benefits, and conversion options, prioritize carriers with the best AUPs. Accelerated underwriting offers clients and advisors the opportunity to have a policy issued very quickly – sometimes within minutes from application to issue – assuming they meet the program requirements.
Qualification for carrier accelerated programs depends on the client’s age, current health, and the death benefit requested. If a client meets all requirements and the application proceeds smoothly through the accelerated program, they may bypass the need for an exam or wait for APS records. Even if a client gets “bumped” from the accelerated program to standard underwriting, their policy could still be issued more quickly simply because they began in the accelerated process.
Several carriers are now considering fluidless programs for older applicants (over 50), provided they have undergone a comprehensive exam and lab tests with their physician in the past year. The maximum face amount for many of these programs has increased and may continue to rise. Some processes can now be fully digital from beginning to end, enhancing the overall customer experience, and expediting the underwriting process further.
For any questions regarding conversion options, please reach out to the AgencyONE case design team. We are here to help you select the best solution and work with new business and underwriting to identify the ideal fit for your clients.
Contact the AgencyONE Case Design Department at 301.803.7500 for more information or to discuss a case.
