Perception is Everything
Upon returning to class after Winter Break, a teacher told her third grade students about what happened to her son, a college student, during the holiday. He was participating in some sort of activity, took a tumble and face-planted. He gashed his chin and his mother was concerned. She thought he might need stitches; but try as she might, she could not convince him to go to a doctor or a clinic. She finally did persuade him to dress the wound with a butterfly bandage. At the conclusion of her story a student raised his hand and when she called on him, he said, “You need to tell your son to man up. He can’t be walking around with a bandage on his face with butterflies on it.”
Sometimes it is how we tell the story that leads to the right or wrong perception of life insurance products as well. Or perhaps it is even how we ask the question of our clients and prospects that leads to a correct perception about life insurance. Because, let’s face it; it is difficult for someone to perceive their own death and the consequences of that on their kids, spouse or business partner.
What is the real cost for life insurance coverage and how much will it cost the beneficiaries if it is not in place? A $500,000 20-year level premium term life insurance plan on a healthy, non-tobacco using 45-year-old costs $676.99 annually; $13,539.80 over 20 years to provide a return of $500,000 to his family so that they may remain in their home, have his children get the education they want, and help them to recover after the loss that the family will sustain. Certainly, there is always the question of “What if I don’t die?” I would say, that would be great, but this small investment on your part assures your family some normalcy moving forward if you do.
Along with that last question, you can also propose benefits that can provide income during the client’s lifetime. Propose an Index UL to let your client take advantage of the tax deferred cash accumulation. Let’s take our same 45-year-old purchasing the same $500,000 benefit on a 20-year payed up Index UL for an annual premium of $5,124.89 annually. “Wow!” they might say because the perception is only in the cost of the benefits, not what it can provide. Let’s look at it in another way. Yes, he would pay $5,124.89 annually or $102,498 over the 20 years for a policy that would pay $500,000 to his family if he were to pass away. Under the currently assumed interest rate of 5.6% the policy will last to his age 121. So again, he would have paid $102,498 over his lifetime for a $500,000 return.
Now let’s take it one step further. Let’s again look at the $500,000 Index UL paying $5,124.89 for 20 years or a total of $102,498; but now in the policy’s 30th year your client withdrawals $102,498 from the policy essentially having a free life insurance benefit plan for 30 years and $102,498 in his pocket for whatever!! What happens to the policy at that point? Because of the withdrawal the benefit amount would reduce to $397,502 which lasts until your client’s age 92 under the current interest rate assumption.
Yes, the perception is a higher cost initially, but now they have a lifetime plan at, really, no cost in the end.
Again, it is the perception versus knowing how a life insurance benefit plan really works that can make the difference. Show your client the alternative of Index UL. Help them to understand what they can really get.
By the way, if you haven’t already perceived this, you get paid a lot more commission on the Index UL plan than the term. It’s worth the try.