By Jeffrey Ranz
In reality, most of my clients can benefit from some amount of both term and permanent coverage. By offering both, we can tailor a plan that meets their needs but stays within their budget.
At this point, I will typically switch over to using the needs analysis from the LIFE Foundation to determine for the prospect how much insurance is needed. Interestingly, the amount of coverage typically developed is 10 to 12 times income. In less complex cases, or with less sophisticated clients or when time is a factor, using the 10 to 12 times income rule is not a bad substitute for the needs analysis.
Once the need is determined, I will run numbers for the clients. I start with the term to give them a starting point. I then run a universal ledger as well.
I verbally tell them the monthly premiums as I don't believe in showing or giving illustrations at point of sale. It only prolongs the process and sometimes is confusing to people. I find that most people generally don't want to know every little detail about how something works or is built. They want to push the button and have it work. The same is true with life insurance. Too much detail is confusing and not really necessary in most cases.
Once the numbers are out on the table, it becomes clear what is within the budget. If I feel that the budget is small and the need is great, I will recommend term. It is not unusual for clients to not want term. I have to usually reason with them to take term for now.
My feeling is that the best insurance is the insurance you can afford, that fills the need, and that is in force when you pass away. If clients start it and later drop it, no one wins. So matching the budget to the need is important. In fact, the only way, at this point, that I can convince them to take the term is to tell them about their upgrade privilege.
Talk about upgrades, not conversion
Most of us sell convertible term. That's all I sell in my company. The key is not to call it “conversion." Most people are happy with their religion. They are not interested in "converting." But most everyone likes the idea of an upgrade. So I tell them that if all they can afford now is the term, it is not the "dead end" that it appears to be.
At first look, term seems as if you are not dead—it ends. But if they use the upgrade, I tell them that we can lock in their health and that sometime in the next few years, when finances allow, they can move some or all of it over to the permanent product. They usually agree at this point, and I take the term application. I promise I will contact them, which I do, and I have a pretty good rate of conversion in the future.
Many times, clients decide that they would rather have the permanent insurance now, even if it is a lesser amount than the needs analysis dictates. The great Norman Levine at a recent MDRT shared with me one of his secrets for getting to the Top of the Table: "Give them what they want, not what they necessarily need.”
So to put that advice to use, even if I believe they need more insurance, if they want the permanent now, then that is what we should consider writing.
Almost 25 percent of the time I will wind up writing two applications—one for the permanent coverage they really want, and an additional term life application to fill in the gap up to what they really need or should have.
Before I write the universal, however, I go into one more educational discussion about the functioning of UL:
“Mr. and Mrs. Client, it is important that you understand a little more about how universal life functions. There are two questions we should always ask about a universal life policy. One, how long will the coverage last, and two, how much cash will it build? The answer to these two questions depends upon two factors: one, which you control, and the other, which you don't.
“The one you control is how much money you put in. Remember, the product is designed to allow for flexible contributions. So I recommend, if we can, to start with putting a little more in up front than the minimum. This will buy you greater flexibility later down the line to skip a payment and so on. The factor you don't control is interest rates. As rates start to rise again, at some point, your contract lasts longer and builds more cash, even if you don't change what you are depositing into the contract. If rates fall, you can prop up the contract by choosing to deposit more into the contract so that it will last the desired amount of years and/or build up the desired amount of cash.”
Plan for annual reviews
I tell my clients that because things will change over time, the company sends them an annual statement. I then pull out one of my personal universal life statements and spend a few minutes going over how to read it.
I also mention that in a low interest rate environment, contrary to what they might think, it is a great time to buy universal life. I say that if the numbers work now in a low interest rate environment, they will look fantastic as interest rates come back to more historic norms.
I tell them that my computer can tell exactly how long the contract will last and how much cash it will build based on a certain amount of money deposited at the current interest rates and making the assumption that those rates never change, which, of course, is not true. What my computer cannot predict is what it will look like in the future as interest rates change.
So we need to keep an eye on the performance of the contract over time. I also say that I recommend that we sit down periodically and review the performance of the contract to make sure it is still meeting their requirements. This sets the expectation for periodic updates and client reviews. I also let them know at this time that we will mail out reminders to them to meet with me periodically. The application is then written….
Jeffrey Ranz, CFP, CLU, is an eight-year MDRT memberbased in Allentown, Pa. He entered the insurance business in 1984 after trying other careers, including stints as an on-air personality playing music on radio stations and later working for a financial advice talk show on business radio. He regularly sells more than 150 lives yearly. The above are excerpts from “Sales Secrets: How to Sell Less Term and More Perm,” a presentation he made during the MDRT 2013 annual meeting in Philadelphia.