Term insurance is designed to provide a needed death benefit to cover shorter terms at an affordable cost. Some compare it to renting insurance coverage because it is not a permanent policy, it does not offer cash value (no equity), and the insured could possibly outlive the coverage. BUT term insurance does something very important – it locks in future insurability making the process of conversion easier.
FUTURE INSURABILITY – A STRONG SECONDARY BENEFIT
While many believe that a term policy only provides a death benefit, clients and advisors should be reminded that term insurance ALSO provides a STRONG secondary benefit – IT LOCKS IN FUTURE INSURABILITY! This is a tremendous plus in scenarios where the client has experienced a change in health that might otherwise make getting underwritten in the future difficult. A term policy guarantees insurability, offering the option to lock in permanent coverage. It is important to remember that conversions do not only make sense due to health reasons. Clients have changing needs over time and a conversion can be an excellent way to help meet their needs without going through underwriting. So, when are term policy conversions a good idea? Following are a few examples:
- a new job or pay raise that may allow an overfunded cash product
- a future estate need
- the addition of a Long-Term Care rider
- an inheritance
- the birth of a child or the departure of children that have aged out of the household
- a mortgage that has been paid off
AgencyONE has talked through many conversion options with advisors recently and was pleasantly surprised with the information provided. Many said that even if the client chose not to convert, the option provided a GREAT reason to check-in with the client. Others said that while the client’s current situation did not dictate a conversion, the conversation resulted in referrals and the initiation of new cases with family members and business colleagues. The conversion option helps advisors stay in front of the client, promotes a current risk assessment, and provides the opportunity for additional sales to the client and any possible referrals that result from the conversation.
WHAT YOU NEED TO KNOW IF YOUR CLIENT WANTS A TERM POLICY CONVERSION
You are required to review and understand the carrier’s conversion details for the existing policy. You must also identify the qualified product choices for converting. Following are some additional conversion facts to consider:
- Some carriers have different term versions with underwriting classes that do not line up. One carrier’s product from 2010 can convert standard plus to standard while a newer version converts standard plus to standard plus. Also, an initial preferred NT rating may be restricted to a standard NT conversion.
- Carrier conversion language may restrict you to only specific products, and these product options may offer little flexibility.
- Some options allow conversion to ANY permanent product available for sale within the carrier’s product line.
- Other carriers dictate specific time frames for the type of conversion that can be made. For example, ANY product can be chosen if conversion takes place early in the term (i.e., the first 4-8 years) of the policy but then limits the available products for the conversion thereafter.
- Carrier product selections are constantly changing. Products that clients have successfully converted to in the past may not be available in the future. Many GUL products have either been discontinued or had price increases that may prevent them from being a viable conversion option for your clients.
- Some carriers will help you promote early conversions to lock in competitive permanent coverage now.
CARRIER PRODUCTS CONSTANTLY CHANGE
AgencyONE remains up-to-date and well-versed in the latest carrier conversion information. Even if AgencyONE is NOT the current GA for the term case you want to convert, we can help obtain the information needed to run quotes, compare fully underwritten coverage, if applicable, and place the conversion for you.
If you would like additional information regarding immediate conversion opportunities we invite you to CLICK HERE to register to attend our webinar on Wednesday, April 28th at 3:00pm ET. This webinar will discuss the changes that are occurring with carriers and products and where the conversion opportunities exist RIGHT NOW!