Neishloss& Fleming Inc.

Another topic that bears discussion is Simplified Issue Single Premium Whole Life.  That product directly relates to the wealth transfer concept, which is moving money from one generation to the next.  Single premium products are designed to help people do this in the most efficient manner possible.  Let’s have a brief discussion regarding an actual sale and how the case developed.

Client is a female, age 70, and in reasonable health.  She was widowed, with 2 living children.  Her house was paid off and she had no significant liabilities.  Total assets, not counting her home, were approximately $100k.  She had a $10k CD maturing that had been earning around 5%.  She was shocked to learn that renewing her CD would give her no more than 1% interest.  The agent, who wrote her Medicare Advantage plan, learned about this situation by staying in touch with the client and making sure she had received all her plan information.

Upon further discussion with the client, the agent soon learned that she really had no foreseeable need for this money.  Her main objective regarding the disposition of her estate was to leave as much money to her children as possible.  In light of the current interest rate environment, a single premium product seemed a very good alternative to renewing her CD.  The guarantees inherent with Whole Life insurance (death benefit, premiums, & cash values) were also attractive to her.

The agent presented American Amicable’s Classic Solution product with a single premium of $10k.  This provided a guaranteed death benefit of $18,018.  Although cash value was not a primary concern, the guaranteed cash value inherent in the Classic Solution product was viewed favorably and provided reassurance in case of an unforeseen emergency.  The agent faxed in the application with a CD transfer form, and the premium was transferred to the company without a paper check being generated.  The policy was issued within a month (as soon as the transfer was made) and the agent was paid on day of issue.

The client consulted her children before signing the application and asked the agent to speak with both of them.  After explaining the wealth transfer concept, the product, and the company; all parties were on board with moving forward.

This sale was made due to two factors.  First, the agent was on the ball by following up with his MA sales to make sure his clients were satisfied.  Second, the agent heard his client complain about an interest rate from the bank and understood the wealth transfer concept enough to realize he was in a position to help his client.

As we discussed in our last issue, Simplified Issue Term can often be a good alternative to Fully Underwritten Term for many reasons.  Fast issue, no medical exams, and the ability to quote face amounts below $100k are all big advantages.  Let’s take a look at some recent cases that have been issued since our last newsletter and see exactly what happened with each one.

• Case #1
  • Male, non-tobacco, age 45, no health issues, needed $50k of coverage on a 20 year term.  This client wanted no part of a medical exam or any kind of hassle.  The agent wrote him with American Amicable.  The application was faxed in to the company, the initial premium was drafted successfully, and case was issued within 2 business days.  The annual premium was $317, and agent was paid commissions on day 2.  This was a simple, uncomplicated case that would have been doomed had the agent presented a fully underwritten product.
• Case #2
  • Male, non-tobacco, age 38, no health issues aside from being overweight.  This client was not eligible for anything but a Standard or a Table 2 rating with a fully underwritten product.  He has no current medical issues, and recently had a physical with his PCP.  The client had no problem with taking a medical exam for insurance coverage, but the agent wisely suspected his lab results might be abnormal in some respect due to his weight.  From an underwriter’s perspective, any abnormal lab results combined with his build could result in a higher rating or a decline.
  • This client needed $110k of 30 year term to cover the mortgage on his new home.  He mentioned to the agent that he did not like the concept of term insurance, where you “use it or lose it”.  The agent quoted American Amicable’s Simplified Issue term product, showing the base policy as well as a Return of Premium rider (which refunds all premiums paid following completion of year 30).  This changed the client’s attitude about term insurance.  The annual premium with the ROP rider was $753, while the annual premium without the ROP rider would have been $593.  This made for an easy choice, as the extra $160/year gives the client a check for $22,590 at age 68 (assuming he outlives the policy).  If he does not outlive the policy, his beneficiaries will get a check for $110,000.  The application was faxed to the company, and the policy was issued in 4 business days.   The agent was also paid commissions on day 4.

Both of these cases were issued in a very timely manner which allowed the company to pay commissions just as fast.  In order to make sure your term cases get issued quickly, it is important to remember that an underwriter is not going to have medical exams or lab tests to reference on your case.  Without full and detailed information on the application, a request for medical records may become necessary.   By giving the underwriter as much information as possible, you eliminate the chance of questions or doubt regarding any significant medical conditions on your applications.  Chances are you will see your business issued as timely as the two cases above.

We all know that term insurance is the most commonly requested form of life coverage and in many instances is the most appropriate choice for our clients.  But a simple term sale can sometimes become a nightmare of medical exams, requests for medical records and upset clients who are frustrated at the long delay in getting their policy issued, if in fact it can be issued at all.  A client who has been declined for coverage might not remain a client for long!  What to do?

Consider Simplified Issue Term (SIT)!  Underwriting guidelines are much simpler and readily available for review prior to taking the application.  In most instances, you know beforehand whether your application will be approved.  Most importantly, you’ll know how much it is going to cost.  SIT rates are generally priced higher than fully underwritten products with Preferred risk discounts, but we all know that many clients are not going to receive those discounts anyways!

In addition, SIT products are available at face amounts down to $25,000 and they offer very competitive Return of Premium riders.  In today’s interest rate environment, ROP riders can be very attractive.  We all know the vast majority of our term life clients will outlive their policies…

Did I mention first year commissions are usually much higher on SIT products than fully underwritten term?  Well they are, as well as the fact that SIT policy fees are usually fully commissionable!

Think about using SIT on your next term case when appropriate and quit waiting weeks or months for your case to be issued!