Life insurance is a promise that must be kept. The ssence of life insurance is that it’s not a gamble or wager; it’s a guarantee, as opposed to other invest- ments that cannot provide that certainty. This is why
an essential part of any life insurance plan is to make sure it
lasts. Every insurance and financial professional should have
a plan in place to ensure that their client’s policy does not fail
or lapse. This not only requires careful pre-planning but also
involves regular follow-up and monitoring after the sale.
Follow-up after the sale is good business. It shows you still
care and value the client even after you’ve made the sale. That
says a lot about you, as opposed to someone who makes the
sale and you never hear from them again.
I have had many clients over the years who cannot remember the name of their insurance agent because they haven’t
seen or heard from him or her since they bought the policy.
If anything, you want them to know who you are when that
policy, the plan you created, pays off.
What can you do in pre-planning mode to make sure that the
life insurance policy will not fail?
Term life insurance, by definition, is meant to expire after the
term. However, term insurance can be made renewable and
convertible to provide protection against the risk of uninsur-
ability. That is one way a policy can fail, if it cannot be renewed.
Even if term insurance can be renewed, the premium can
increase due to age. If those premiums become too expensive,
the client may not be able to make payments and the policy
will expire. That is not good for anyone.
This is a conversation you should have before a sale. The
client needs to understand this.
Explain the options and document that conversation to
avoid surprises later on. You might suggest level premiums
over the term and the ability to convert the policy to permanent insurance without a new medical exam.
Always follow-up after the sale to stay in communication with
the client regarding the status of a policy. You’ll also find that in
some cases, this leads to new life insurance sales for clients who
want to upgrade their policies or switch to permanent insurance.
Poorly structured policies or drastically increasing premiums can
cause even a permanent policy to lapse, resulting in the loss of
the life insurance protection. For the client, a lapsed policy can
be a devastating shock and be viewed as a broken promise. That
is why the policy has to planned and explained during the pre-planning process — before the sale is made.
Work with your client to create a plan that will hold up for
life, or close to it. For example, clients need to know up front
By Ed Slott