How to communicate the value of whole life insurance
I want to start out this article by stating the obvious: We should not sell any kind of insurance that is unsuitable to our clients' needs. That's the whole point of being a trusted advisor. That's also our focus here at Life Design Analysis. That being said there are a lot of people who could benefit from at least some form of permanent coverage such as whole life.
What is "whole life?"
Let's start off by defining what Whole life insurance is. Whole life insurance is a form of permanent life insurance, meaning the insurance benefit is payable to your beneficiary regardless of the age of the insured* (provided the policy is paid up or in good standing.) This is different from term insurance in that most term products have a renewable to age where the policy would lapse/expire. Whole life generally can be classified in one of two categories Participating and Non-Participating.
Participating
- Life-Long Protection
- Guaranteed Premium Ammount
- Guaranteed Cash Value
- Guaranteed Insurance Benefit
- Can have Guaranteed Pay schedule (However, be careful because many plans have a planned schedule that is based on a specified or assumed "dividend")
- Dividends - The benefit of participating plans is that you get to participate in the whole life par fund that issues a dividend (these are not guaranteed). Dividends can be structured in many ways. The most popular being Paid Up Additions (PUA) where the dividend buys additional insurance.
Non-Participating
- Life-Long Protection
- Guaranteed Premium Ammount
- Guaranteed Cash Value
- Guaranteed Insurance Benefit
- Can have Guaranteed Pay schedule
How to communicate the value of whole life
Yes, whole life is expensive but I always like to stress that, "price only matters in the absence of value." It's not often we don't get what we pay for with almost any type of product these days. Today, if something is simply expensive without being good, the market would dictate its failure. However, whole life has been around for well over 100 years. This famous Venn diagram highlights the drawback that price generally has on the effectiveness of a product or the speed in which it is delivered.
You Can Only Pick Two
So how can we get our clients to see the value in permanent products?
One way to get your clients or prospects to see the value in permanent products is to ask them how long they would like their insurnace to last.
My Stepfather would always ask clients at the first meeting:
He would wait for as long as it took for the client to answer.
This is an important question to ask because many people only focus on the initial cost or the immediate need of a term policy, forgetting the value of term insurance is accessed when one passes away. Did you know less than 1% of term insurance is issued as a claim for people over 60? So by getting your clients to think about the big picture, we can show them the real value of permanent insurance.
Don't get me wrong. There is still a place for term insurance. I cant think of a better short-term fix when cash flow is limited but it is always better to at least have some form of permanent coverage. Remember:
Now, we also talk about value not in terms of just cost of the product but what it offers cash and a way to access it... tax-free! What we're looking at is an LDA chart of the cost in red vs. the total cash value in green. It's easy for the client to see with a visual and quickly process that there is more cash value in the policy than the premium paid under the current and even reduced dividend.
LDA allows you to visually contrast the current dividend scale vs. reduced or guaranteed values. The reason this works is visuals are processed 60,000 times faster than text and numbers by the brain, helping clients instantly see value of what they paid vs. the value of the policy. Combine the visual below right after and you have demonstrated the cost comparison from above and it's no wonder 90% of LDA members increase revenue directly thanks to better communication.
You can also apply time value of money calculations or IRR if your audience is more financially advanced. Think about adding a custom callout to further enhance your communication with your clients and prospects.
What if cashflow is an issue?
If cashflow is an issue, don't abandon whole life altogether. We still have great options:
Layered Term With Whole Life
Enhanced Dividend Option
Enhanced Divdend Option + Layered Term
Multiple Options
Sometimes we don't know what the client can afford. Why not set up a "good, better, best" scenario and lay the values over each other to let them pick the right balance of premium and value?
Conclusion
Pros
- Guaranteed Premium Schedule
- Cash Value
- A benefit when you die, not if you die at the right time
- Protection for the eroding effect of inflation
Cons
- Initial Cost
- Assumptions
- Flexibility
In conclusion, if were going to show value in whole life for our clients, we need to present it often (maybe in every case) and we need to make it a compelling presentation that makes it extremly easy for our client to see the value.
Know somebody who would enjoy this article? Please share it!
Want to get more articles like this in your inbox? Subscribe to our newsletter below!
Want to sell more whole life? Start your FREE trial today!
