The art and discipline of insurance jargon and how to share it with your clients
How can we convince our clients to buy when they don’t even understand what we are offering? Every industry and occupation, from car wash operation to janitorial services to medicine, requires on-the-job learning, specialized training, and adoption of insider terminology. Life insurance and other insurance services only prove the rule, with hundreds of insider terms that too often confuse and turn-off potential clients within moments of first contact.
When it comes to sales, having a clear grasp of these terms is every bit as important as knowing how to explain them to prospects clearly without unnecessary complexity. Here are some common life insurance terms and how you could approach sharing them.
Premium: The cost paid by the client for the policy, often divided into yearly, monthly, or other time period payments—and for many Americans working paycheck to paycheck or building their finances, one of the single most important points in the conversation. The burden to convince clients that they should prioritize and take on this expense falls to you.
Face Amount: The amount paid in case of death or at the policy’s maturity, plus additional amounts payable under accidental death or other special provisions or acquired through the application of policy dividends. But does a face amount hold enough to meet your customers’ needs? It’s up to you find out!
Policy Loan: An advance made by a life insurance company to a policy owner. The advance is secured by the cash value of the policy.
Cash Value: The amount of money the life insurance policy owner will receive as a refund if the policy owner cancels the coverage and returns the policy to the company. Also called "cash surrender value."
Accelerated Death Benefit Riders: An insurance policy with an accelerated death benefit provision will pay – only under certain conditions - all or part of the policy death benefits while the policyholder is still alive. This will be a one-time lump sum. These conditions include proof that the policyholder is terminally ill (Terminal Illness Rider) with a life expectancy of less than 12 months, has a specified life-threatening disease (Chronic Illness Rider), or is in a long-term care facility such as a nursing home.
Child Term Rider: Adding this rider to your life insurance policy, allows you to insure a child between the ages of 15 days to 24 years old. This option is typically cheaper to offer insurance for children then it would be to buy them an individual policy with the parent as the owner. Typically these riders can be convertible, depending on the carrier guidelines.
Lapse Rate: The percentage of policyholders in the same life insurance policy who fail to follow through with their premiums. When policies are lapsed before enough premium payments are made to cover early policy expenses, the company must make up this loss from remaining policyholders. In other words, when too many policyholders fail to make payments, it increases the cost for the remaining customers.
Non-Forfeiture: An option available to a customer or policy owner who stops making payments on a policy with a cash value. The customer can take and use their cash value to purchase extended term insurance or reduced paid-up insurance—rather than falling out of the system altogether.
Policy Proceeds: The amount paid on the life insurance policy when the policy owner receives payment at surrender or maturity, or upon death. This is the payout, the ‘what’s in it for me?’ that customers are after. Without a clear understanding of this value, life insurance is just another bill your customers might hope to avoid.
Settlement Options: The several ways, other than immediate payment in cash, in which a policyholder or beneficiary may choose to have policy benefits paid out.
Reinstatement: The process of and steps to restore a lapsed policy to its original status and bring a customer back into the fold.
Loans will reduce your cash value benefit and death benefit and may be subject to surrender charges. Unpaid loans are subject to ordinary income tax and, if taken before age 59 1/2, may result in a federal tax penalty.