Sell the insurance and then make the plan

By Jim Ruta | July 07 2011 08:17PM

It’s like it isn’t “legal” to just sell life insurance anymore. What’s happened?

It just seems illegal. Life insurance’s position as the financial cornerstone has been replaced by a financial plan. That’s all good until you realize that financial plans don’t sell well to the vast majority of consumers which means fewer people than ever get to see it. The time commitment is a significant barrier to purchase. And, regardless of their intrinsic value, financial plans just aren’t that compelling to most consumers. I am not against financial plans, but who decided they are the only admission ticket to buying life insurance?

I’ve bought a dozen houses in my life and have never even been asked to do a financial plan first. How about the hundreds of thousands of dollars I’ve spent on cars? (Ouch) No plan there either. House insurance? Nope. Getting married? Having children? No and no. So what’s the magic about life insurance that requires it to be “planned” as part of some overall approach? I see the value in planning, just not necessarily for everyone.

Marginalizing life insurance

Financial planning is unintentionally marginalizing life insurance by making it a small part of a bigger picture. But, it’s much more important. It guarantees “big pictures”. Even if you don’t have a “big picture”, you can create one (as we used to say) “with a drop of ink and the flourish of a pen”.

Life insurance guarantees financial planning objectives. Financial plans only work if you have the time to make them work. But if you don’t have that time, life insurance steps in and finishes the job. It’s brilliant. Always was. Still is. Sell it.

Picking your way through a financial planning maze before you get to life insurance or any of its cousins (disability insurance, critical illness insurance, health insurance and long term care insurance), slows implementation to a crawl. It also jeopardizes coverage should a client cross the “line of insurability” before issue. Time is of the essence.

Agent productivity is down

And, right now sales and producers are crawling along with the current process. Agent productivity is down. Life insurance sales are at a 50 year low. Insurance is an afterthought in most “planning”. The number of new entrants to the business is plummeting for lack of appeal and potential. Associations devote most of their time to money business regulation and education that fewer consumers ever see rather than helping increase insurance business. Traditional sales concepts like children’s life insurance are dismissed out of hand by industry leaders. Sales training to help consumers buy appropriately has disappeared along with the resulting sales.

Life insurance can be a standalone product when used for the purpose originally intended – to provide tax-free cash at death for those you care about. But, it needs to be championed. When it is, it sells. Everyone wins.

Here’s how you know the market is alive and well. Major bank-owned life insurance companies are advertising life insurance – just drop by one of their convenient offices in your neighbourhood. Aren’t you a neighbourhood professional?

Any ideas on how to make a better case for buying Critical Illness Insurance?

It’s interesting how no standard “Critical Illness Needs Analysis” has developed. There have been many approaches including funding house refurbishing to account for disabilities, paying for top medical care from around the world and replacing personal income for a period. I even believe that some agents adopted the lottery approach where a serious affliction paid off handsomely. Still, CI coverage isn’t that compelling, as sales suggest.

I remember Dr. Marius Barnard saying he invented CI because while medical advancements assured so many more people survived “dread diseases”, too many of the survivors were wiped out financially. It makes sense then to account for potential financial losses first.

Think of a family. What are the consequences of a Mother contracting a critical illness? Who would she likely want by her side during treatment? Who would the children want to be with them in those difficult times when Mom couldn’t be there? How long would treatment and recovery take? Who would pay the bills? Where would the money come from? How much trauma can a family take?

This draws a very different picture than just thinking about the client individually. Think about the whole family and their requirements and losses. Think about funding the whole family’s real needs during the recovery.

Protect the family

With this perspective, meaningful numbers appear to protect the family. Both parents are “analyzed” in the same way. But here’s the math for Mom. If she is stricken, the family loses Mom’s income during treatment and recovery, say until she gets back to work. Because Mom wants her husband by her side during that difficult time, we also lose Dad’s income for maybe the same amount of time. Alternatively, Dad is with the children. Sure, vacation days reduce the loss, but not by much for most critical illnesses. It’s obvious how vitally important this sort of coverage is for any self-employed business person or professional – really just as important as disability insurance.

Every day we read about vital medical treatments not covered by our government health plans. These extra medication costs add more expense and further affect the entire family. It’s difficult to quantify this potential expense but there is another way to account for it.

The way is to use insurance to fund some of their household expenses. It’s not so much about paying off a mortgage but making the payments for a number of years to allow financial breathing room. It’s a more reasonable and thoughtful approach. Adding one or two year’s mortgage payments and maybe taxes and utilities at least assures that the family has a house to live in while they have extraordinary expenses around the illness.

Critical illness protection for each parent can easily be justified as one or two year’s income for each parent plus accommodation expenses for the same period. This story makes sense and legitimately helps the family survive a critical illness, just as Dr. Barnard hoped. You’ll sell more too.