Buy Term and Invest the Difference...NOT!!!
Why Final Expense Agents Should Prioritize Permanent Policies Over Term Insurance
As Final Expense agents, we often encounter clients who have purchased term policies to cover their final expenses. While term insurance might seem appealing due to its lower cost, it’s usually not in the best interest of our clients. Here’s why replacing a term policy with a permanent final expense policy is crucial and how to effectively make this switch.
Understanding Term Policies
Term insurance is designed to last for a specific period, whether that’s a certain number of years, until a certain age, or until a person leaves a group plan. Often, these policies become more expensive as time passes or once the level coverage expires. This makes term insurance suitable only for temporary needs like a mortgage or car loan.
Why We Advocate for Whole Life Insurance
As Final Expense agents, we offer families the stability of Whole Life insurance to cover burial and final expenses. Our clients typically have limited incomes, making it essential that their insurance premiums remain stable. Whole Life insurance provides this guarantee, ensuring that their coverage doesn’t expire before they do. In fact, less than 2% of term policies ever pay out because clients either outlive their coverage or can no longer afford the premiums.
Encountering Term Policies in the Field
When you come across clients with term policies, the price is often the main reason they chose term over Whole Life. It’s important to reset their expectations about price early in your presentation. Here’s a step-by-step guide to help you effectively replace term policies with Whole Life insurance.
Building Trust and Establishing Expertise
Build Rapport: From the moment you enter the door, work on establishing a good relationship with your prospect. They need to see you as an expert who genuinely has their best interests at heart.
Educate About Insurance Types: During your presentation, casually ask, “What do you know about the different types of life insurance programs out there, like term life and whole life?” This allows you to gauge their understanding without sounding condescending and sets the stage for further education.
Highlighting the Drawbacks of Term Insurance
Explain Term Insurance: Clarify that term insurance is temporary and will expire, often increasing in price every few years. Mention familiar companies like AARP and Globe Life, and emphasize that less than 2% of term policies pay out.
Discuss Whole Life Benefits: Transition to explaining the benefits of Whole Life insurance using a simple Program Guarantees sheet. Highlight how Whole Life provides stability and doesn’t expire, which is crucial for final expense planning.
Getting the Policy and Making the Case
Obtain the Policy: Always get a copy of their current policy. If they don’t have it, call the insurance company. Clients often think they have Whole Life when they don’t.
Show the Facts: Review the policy with them, pointing out that it’s term insurance. Use a tone of concern and surprise to emphasize how unsuitable term insurance is for their needs. If calling the insurance company, let them explain the terms and price increases, reinforcing your point.
Presenting the Solution
Compare Costs and Coverage: Write down all future premium increases and show them to your client. Explain that continuing to pay these increasing amounts will eventually leave them without coverage.
Propose Whole Life Insurance: Say, “Most people in this situation take the money they’re already paying toward their term policy and apply it, plus whatever extra they can afford, to get a Whole Life policy.” Ask how much more they can afford to invest in a permanent policy.
Show Options: Present different Whole Life options based on their budget, emphasizing that even the smallest amount of permanent coverage is better than none.
Closing the Deal
Assume the Sale: Guide them through the application process with confidence. Say, “Who do you want to leave this to when you pass?” and start filling out the application.
Conclusion
By educating your clients and guiding them through the process, you can effectively replace term policies with Whole Life insurance. Remember, people buy based on value, not just price. When you present Whole Life insurance as the more valuable, permanent solution, your clients will see the benefit and make the switch.
Josh Jones and his partner Brandon Smotherman, a $400,000/year Final Expense Producer, have extensive experience in the Final Expense and Medicare markets. They are now sharing their proven system with agents to help grow their businesses. Whether you’re new to the Final Expense market or a seasoned agent looking to increase your income, Josh and Brandon can provide the knowledge and resources you need.
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