That’s why a variety of products are available to match each situation — including short term-life insurance policies. These can help solve a budgeting challenge, while providing peace of mind. According to LIMRA, the three main reasons Americans buy life insurance of all kinds is to cover funeral expenses (84%), to help meet financial obligations in the event of a breadwinner’s death (62%) and to transfer wealth (66%).
Still, 20% of those with existing life insurance policies say they don’t have enough; and 20% of those without coverage don’t understand the correct amount to protect their families. Perhaps most surprising of all — 43% of millennials say they’ve never been approached about purchasing life insurance, according to LIMRA’s data.
Short-term vs. Permanent
A permanent policy can provide many benefits, whether it’s whole life insurance, variable or universal — which provides constant coverage until death as long as the policy remains in force. But a shorter-term policy can also provide great value, sometimes even in combination with another kind of policy.For example, your client needs extra coverage because his or her children are still in school, but might not need as much afterward. A one-year policy would be appropriate for someone who is between jobs and wants life insurance; a five-year policy could help cover a loan or debt (such as on a car or credit cards); 10 years could work for someone with young children to make sure there’s coverage if the household income sharply decreases; and 20 to 30 years, the most common, could cover all of the above.
The value in a term policy includes fixed premiums and lower costs — there are no surprises and no increases. And because you never know what life may throw at you, these kinds of policies are renewable (but they will likely end up costing more the second time around, and the client may need to take a medical exam and answer lifestyle questions for eligibility, depending on the policy and carrier).
Some term policies may also offer riders and/or privileges — make sure you discuss any available return of premium, which pays back a portion or all premiums if the insured survives the policy term; waiver of premium, under which the insurer gives up the right to collect premiums while the insured remains totally disabled; and a conversion privilege, which allows the policyholder to convert the policy to a cash value policy without having to provide evidence of insurability.
Candidates for a term life policy
For an older person in ill health without dependents, a term policy may not be the best option. It may be a smart choice, however, for someone who is meeting major life milestones: a young person getting married and starting a family; a married person buying a home who wants to make sure his or her spouse can cover the mortgage and other bills in the event of an untimely death; or someone who has started a business without additional coverage or life insurance from an employer-sponsored plan. Your client may be a good match for term life insurance if the client is:
- In relatively good health
- Around age 50 or younger
- Someone who wants coverage but is on a budget
- Someone with uncertain circumstances or a changing family profile whose insurance needs may change over time
- A small business owner who wants to provide insurance to cover the loss of key personnel
Helping your client with next steps
Your client may wonder what the specific benefits of owning a term life policy might be. They might inquire about different term options, as well as what level of coverage makes the most sense for their situation. They could also look for an overall insurance audit to see if term insurance is a good fit at this time.
To be of optimal help, ask your clients to gather all the information necessary to make a sound decision regarding the best policy to suit their needs. How much will they need to meet any existing debt obligations (such as a mortgage or car payment), as well as the amount necessary for regular living expenses? This process may require time and effort, but remember: an informed customer is a happy customer.
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