If your New Year's resolution is to find new life insurance business, you'll have your work cut out for you in 2010, cautions advisor Jeff Leib, CFP, CLU, RFC. Yet Leib, co-founder of ICON Wealth and Legacy Partners in Woodland Hills, Calif., says opportunity still knocks for advisors to grow their life insurance businesses in the year ahead, provided they are shrewd about who they target and how they target them.
"Seniors typically don't buy life insurance because they don't think they need it anymore," explains Leib, a life insurance specialist since the mid-1980s. "It's not a basic life insurance sale. It's a problem-based sale. The advisor has to uncover the problem and show how life insurance is the best solution."
In most cases, he says, the types of hurdles that life insurance can help seniors overcome surface in advanced-planning scenarios estate planning and small business planning are prime examples. "Most of our [life insurance] sales are in the advanced-planning arena, where someone has tax issues to resolve or they are focused on leaving a legacy."
Sometimes, however, the problem-solving process is complicated by broader concerns. The prevailing, post-financial-meltdown view of life insurance is that it's a luxury people can't afford to purchase right now. So term and permanent life insurance alike are a tough sell, even when the need is evident, says Steve Roper, who heads Roper Insurance and Financial Services in Englewood, Colo. "They look at things differently now: 'Life insurance who cares? I have to worry about survival now and take care of my core needs.'"
How to build your book of life insurance business in the face of such an austere mindset? By finding answers to the fundamental questions about the market you're targeting:
WHO to target for new business? People for whom passing on a legacy to heirs is a key concern represent a good starting point. With so much uncertainty surrounding federal tax policy, and estate tax rules in particular, permanent life insurance appeals to seniors for its ability to provide certainty that a tax tab will be covered, even if tax policies change, as they're likely to do in 2010, when rules put in place by the Bush administration are due to expire, says Leib. Small business owners are another segment worth focusing on. "Nobody's talking to these people about life insurance," Roper observes.
WHAT types of life insurance products most appeal to seniors? When the list of objections starts and ends with price, as is often the case, there's little sense in recommending a permanent policy, according to Roper. Instead, he suggests talking about term-to-age-100 types of policies, which often come substantially cheaper generally 30-40 percent than traditional permanent policies, while still providing lifetime coverage (often to age 120, with premiums paid to age 100). They come on a universal life chassis and aren't designed to build cash value like typical UL policies. "It's a nice option," explains Roper, "for people who have less cash but have a permanent need for life insurance."
Advisors should also look for situations that call out for permanent life insurance. For example, notes Leib, a single-premium UL policy might be ideal as an asset-replacement tool in an estate-planning context, where it's likely to be used with some sort of trust. Meanwhile, advisors who count business owners among their client base would be wise to discuss with them the potential purchase of permanent life insurance in the context of succession/transition planning or as key-person insurance, adds Roper. What's more, notes Leib, purchasing permanent life insurance (usually UL) to incorporate into an employee defined benefits plan can provide significant tax write-offs to owners of "C Corp" businesses.
