When you discuss life insurance with a client, a number of objections are likely to emerge. One of them — that they already have free or low-cost coverage through their employer — can be difficult to overcome. A skilled agent needs to highlight the importance of permanent insurance and the proper amount of coverage to convince the client to reach into their own pocket for more protection instead of relying on something temporary.
But in today’s economy, the “temporary” label doesn’t just apply to the nature of the insurance clients have through work; it also reflects the work itself. A lack of job security means that many jobs — and their accompanying benefits — are constantly in danger of being eliminated altogether. Clients who cannot be certain where they’ll be working in a few years also cannot be confident about what their benefits will look like at that time.
On one hand, those economic uncertainties create challenges for agents whose products compete with other essentials in a shrinking family budget. Even a client with job security and other insurance needs might find themselves unwilling to move forward with a necessary program. Writing a check for a large policy could take a back seat to other priorities, and decisions regarding coverage could be deferred to an unknown point in the future.
But the most successful agents often find opportunities alongside obstacles, and the current economic climate can provide plenty of both. Can agents overcome client concerns about the future by arguing in favor of adequate coverage? Can they help show prospects who are wary of new financial commitments the benefits of additional short-term and permanent policies? And in this economy, what are the best methods to increase a client’s peace of mind and an agent’s business at the same time?
Marvin Feldman, president and CEO of the LIFE Foundation, a nonprofit educational resource, said that losing work coverage is especially difficult for the millions who don’t have their own insurance policy.
“When they lose their group insurance, it really makes them go bare at a time when they need it more than ever, because if something were to happen to them at that point, there’s nothing for the family to fall back on,” Feldman said.
If an agent has clients in this situation, he advises the agent to be proactive and reach out to help clients make informed decisions and obtain the right amount of coverage. While money will be an issue for anyone with employment uncertainties, the low cost of term insurance makes it a viable stopgap solution for many who need sizable coverage at an affordable price.
Feldman also pointed out that even those who remain employed need to review and adjust the amount of coverage they have, since the term insurance provided through work is usually just a small portion of their annual salary.
“If you have somebody making $50,000 a year and their group term insurance is $50,000 or $100,000 maximum, they’re way underinsured to begin with, and they need to be supplementing that with some outside coverage,” he said.
Tony Franks, a financial planner with MetLife, is seeing a renewed interest in policies that replace coverage that ended when the prospect lost their job.
“I have been seeing my phone ringing a lot more because people are losing their jobs,” Franks said. “They still have families. They still have spouses that need to be taken care of.”
He said that price-conscious clients are also receiving advice from the media regarding the benefits of term insurance, so their interest may be heightened from commercials and other outlets that provide general advice.
While he said that term usually meets a short-term need, however, agents should make sure their clients are educated as to the pros and cons of different policies before settling on a solution.
Franks also said that supplementing term insurance obtained through work can have additional costs if the client goes through their employer to obtain that extra coverage. In some cases, the client pays a higher price as the insurer also needs to cover those in the group who are in worse health. As a general rule, Franks said that healthy clients should consider supplementing their work coverage with a policy on their own, noting that an agent can provide a lifetime of assistance and advice as opposed to the limitations of a human resources department.
Richard Koob, a Northwestern Mutual financial representative with 41 years in the business, agreed. He believes that it’s important for clients to control their coverage by obtaining policies independent of their work benefits.
“I always encourage people, even when they do have employer-sponsored benefits, to match it — to say, ‘I need to have some insurance in force that I control that is not subject to external circumstances,’” Koob said. “‘I control this, and as long as I am able to pay the premium I am assured that I have continual coverage.’” That way, he added, clients always have a policy to fall back on regardless of their employment situation.
He admitted that the public has adopted a general apprehension to making long-term financial commitments because of economic uncertainties. If an agent presents a comprehensive program that requires more than a nominal investment, they can expect the client to delay action for several months. Koob suggested offering a term policy to cover the client while they’re deciding on a more complex strategy. He believes that if the need truly exists, doing nothing will not only fail to solve the problem but could create more troubles in the long run. Term insurance, while not a long-term solution in those cases, will provide affordable coverage and help meet those needs. In addition, a good term policy with convertibility allows clients to obtain a more permanent policy without providing further evidence of insurability.
Dick Miller, a regional vice president with Pacific Life, also believes that term insurance can be a valuable short-term solution, but believes that agents should be adamant about the importance of a more permanent plan when appropriate.
“Too often, people depend on employer-sponsored insurance to cover them,” Miller said. “Insurance is something that should be considered valuable enough of an asset to be personally owned.”
Instead of considering another policy as a supplement to their term insurance through work, clients should consider their employer-sponsored program to be the supplement to their own more comprehensive program, he said.
Miller believes that agents should explain that insurance shouldn’t be seen as a simple expense, but a valuable asset with benefits that make it integral to a financial plan. He acknowledges that clients might be experiencing financial challenges that make implementation difficult, but agents should look for the best way to cover a client’s needs and create a foundation based on permanent solutions.
“In this current economic environment, where people are watching what they’re spending, term is probably, in some situations, a good answer,” he said. “But there are still other situations where permanent insurance can still be the answer today.”
Regardless of what path an agent takes in meeting a client’s insurance needs, experts agree that finding a solution and investing in the agent-client relationship is ultimately good for business, even if the early returns don’t fully compensate for the efforts. While the commissions generated from a basic term insurance policy might not sound enticing in the short run, Feldman encourages agents to be patient and take a long-term approach to their books of business. Those clients who begin with a simple term insurance policy can develop into consistent and profitable repeat business for an agent who takes the time to meet their early needs.
“That [term insurance] client could possibly grow into a very nice client over a long period of time,” Feldman said. “It’s the initial investment in time and effort that the agent has to make, and they’ve got to make that determination [whether] they want to do this. In most cases, it will probably work out.”
Miller also believes that a sound agent-client relationship will eventually become a valuable asset to both parties.
“The key is to make them a client, and have them build trust in your advice and your judgment,” Miller said.
“The type of product will become secondary to the quality of advice that you give them.”