Agents Find Hard-Hit Clients View Replacement As Viable Option
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For years, the term replacement has had a negative connotation, often associated with agents who churned policies to generate new commissions. Consequently, regulators have made it increasingly difficult for agents to replace an old life insurance contract with a new one.
But many successful veteran agents in the field today are finding there are instances where their clients situation has changed so much that replacement should be presented as a viable option.
Indeed, clients often bring up replacing a policy themselves. With continued downturns in the markets and low interest rates, many policyowners have changed their mind about their risk tolerance regarding their insurance portfolio.
Instead of a cash-rich permanent insurance policy, many policyowners now own a life policy with diminished returns that requires immediate attention. A lot of these policyowners are "fearful that its going to run out [of cash value]," says Joseph T. Molony, a member of the Northwestern Mutual Financial Network in Lancaster, Pa.
"We do what we can to salvage what they have and supplement it with new coverage," he adds.
One option Molony has taken with some of these policies is to "beef up" the premium to a level where it will sustain coverage for the clients lifetime.
But even if it comes down to a replacement, Molony explains that in these situations, "it may cost more in the short run, but in the long run youll be better off."
Increasing premium payments may not always be an option for those who purchased variable life policies during the height of the market. These clients have lost a lot of the cash value in their policies and now they want to know "what to do next," says Bob Nelson, vice president of Grace-Mayer Insurance Agency, Omaha, Neb.
Some clients Nelson has met with have expressed the desire to get out of their variable life contract and get into something with more guarantees. "They said their appetite has changed," he adds.
One of the problems is the fact that life insurance is, in theory, a product you own for your entire life–but how can someone whos 30 years old know what he or she will need by the time they turn 65, notes Nelson.
