In today’s fast-paced world, training and education can often fall by the wayside.
No matter how many people you talk with about life insurance, you won’t make a single sale if you don’t have the right information.
Your continuing education is the key to sales success.
Here are some of the issues that you’ll face when selling Indexed Universal Life (IUL) and Variable Universal Life (VUL), naming a beneficiary, using drop tickets, and much more.
You’ll also find out about some training opportunities – webinars and videos – that are available to you.
Life insurance producers: Here’s what you need to know.
Table of Contents Life Insurance Field Underwriting: The Skill No One Is Teaching You Naming a Beneficiary Underwriting for Drug and Alcohol Users Contracting and Licensing Key Person Life Insurance Selling IUL and VUL Policy Review “Living” Life Insurance Benefits Funding Buy-Sell Agreements Selling Return-of-Premium and Term Life Permanent Life Insurance Learn to Use Drop Tickets Mistakes to Avoid Modern Training Opportunities Final Thoughts
Life Insurance Field Underwriting: The Skill No One Is Teaching You
One of the most ignored areas of life insurance training and education is field underwriting.
It’s much too important to be overlooked.
Here’s a basic definition of field underwriting:
When a life insurance producer goes out into the “field,” he will gather information about how insurable a prospect is on the spot.
You probably spend a lot of time with your potential clients, laying out the benefits of your products and services.
The last thing you want is to “sell” someone on their need for a certain policy, assure them that they’ll be issued coverage, only to find out that they are, in fact, rated or even denied.
If this is happening to you more than you care to admit, you need some help.
The benefits of field underwriting
You’re doing yourself and your prospective clients a big favor by being prepared to go out into the field.
- It saves time.
- It increases the number of cases you can close.
- It allows you to give your clients realistic expectations.
- It makes you more credible.
- It could lead to recommendations.
Best practices for field underwriting
There are some specific things you can do to make the process smooth for your clients and for yourself.
- Get familiar with your prospects. Record how you came into contact and gather the right information. Here are some pertinent health questions you should ask to get started.
Do they take any medications? Why?
Are they currently or have they ever suffered from diabetes, cancer or heart disease? If they answer yes, you need to collect information about their treatment, including dates.
- Include a cover letter. A cover letter that contains an explanation of the process and the need for the particular coverage can make things move more quickly.
- Take advantage of the best tools. At Leisure Werden & Terry, we use XRAE. It’s a multi-carrier field underwriting and quote-management tool that makes the process quicker and more simple.
Naming a Beneficiary
Keeping your clients well-informed is one of the ways to ensure that they’ll continue working with you for the long-haul.
You have to be knowledgeable so that you can confidently relay the best information to prospects and clients.
One of the areas in which mistakes are commonly made is naming a beneficiary.
Here’s what your clients need to know about how NOT to designate a beneficiary.
1. Don’t name a minor.
Naming their children as beneficiaries makes perfect sense to young parents who want to leave money to their children.
The problem is that minors can’t legally own property so insurers won’t pay a benefit directly to them.
When a minor child is designated as the beneficiary, they are unable to enter into the necessary contract that would allow them to receive the money.
2. Don’t name a relative as proxy for minor children.
Even those parents who understand that they shouldn’t name their children as beneficiaries may make another common mistake: Naming a relative.
For example, it seems to make sense to have a trusted aunt be the beneficiary.
If something were to happen, she would accept the money on behalf of the children and act in their best interest, right?
Unfortunately, there’s no way to guarantee this is the way it will go.
Once auntie has the money, she has discretion. What she does or doesn’t do with it is completely up to her.
3. Don’t name an estate as beneficiary.
There are a couple reasons this is a bad idea.
- The probate process. This delays the payout and also incurs extra fees for the process.
- Creditors. In some states, naming a person as beneficiary prevents creditors from making claims on the payout. This isn’t the case when an estate is the named beneficiary.
If the policyholder doesn’t have a will, there are other problems that can come up.
- An administrator must be appointed by a judge before any funds can be paid out.
- The state can decide on the distribution of assets, meaning someone who the policyholder never intended may receive their money.
4. Don’t name just one person.
The main reason you should advise your clients to avoid naming one person as primary beneficiary is because of the issues that could arise if the beneficiary dies before the policyholder.
This would lead to the beneficiary being automatically switched to the estate, which we already know isn’t a good scenario.
5. Don’t forget to update beneficiary designations.
Encourage your clients to review their choices of beneficiary during their regular (annual or bi-annual) policy review.
People and their situations are constantly changing.
Your clients should be regularly evaluating their choices as beneficiary to make sure their hard-earned assets wind up in the hands they intend.
It’s your job to make sure your clients are well-advised as to who they designate as their beneficiaries so their wishes are fulfilled.
Of course, getting the right legal advice from a qualified attorney may also be an important step.
Underwriting for Drug and Alcohol Users
One of the most important things you can do for your clients is to give them realistic expectations.
Often, drug and/or alcohol use isn’t discovered until the underwriting begins and it can wreak havoc on the process.
There are a number of factors at play.
Here’s a breakdown.
Ecstasy, heroin or meth
The use of these drugs or any derivatives will absolutely result in a denial of coverage.
If your client discloses the recent use of these drugs, don’t even bother going any further with the process.
While some view Cocaine as more of a “recreational” drug, it’s still not going to pass an underwriter’s examination.
If a carrier knows of any recent or near-recent cocaine use, the prospect will be denied.
The general rule is that any use within the previous three years is grounds for denial.
If the use was more than three years ago, coverage may be approved, but additional costs will almost certainly be applied to the premium. Every situation is different.
This is a trickier area for underwriters.
Many people regularly take prescription drugs for completely legitimate reasons.
The problem is that abuse of drugs like Vicodin and OxyContin has become widespread.
Overuse of prescription medications will likely result in a denial of coverage for your prospective client.
While the average person may not look at alcoholism in the same way they do drug abuse.
But, insurance carriers do.
Sometimes, a prospect may divulge their history with alcohol themselves.
It also may be found when the underwriter examines doctors’ notes and the carrier will require an Alcohol Marker Test.
Alcoholism is not as clear-cut as drug use, however.
Here are the general guidelines an underwriter will consider.
- If the alcoholism is found to be current, no coverage will be issued.
- After a person has been in treatment for five years consistently, they may be approved for coverage, though they may be required to pay increased rates, provided they’re over 45 years old.
- A potential client with a prior alcohol abuse situation will also need to have a clean driving record.
Since marijuana has been legalized in many states, the underwriting process for users is more subjective.
They’ll focus on the reasons the marijuana is being used.
A person who uses marijuana for chronic pain, depression, anxiety, PTSD or another approved ailment may have a medical card and a doctor’s report would help determine if they would be considered for coverage.
As far as the recreational use of marijuana goes, carriers vary greatly.
Some will deny coverage for use that’s as common as four to five times a week but allow coverage at an increased rate for use that’s less frequent – like two or three times a week.
For example, someone who partakes in smoking marijuana once a week may be considered a “smoker” by one carrier and a “non-smoker” by another.
Where your General Agency can help
You need the guidance and support of a General Agency to navigate the differences in carriers.
Stay educated on the changes in carrier positions.
Consult your GA before you move forward on a case with a history of drug or alcohol abuse.
Contracting and Licensing
Additional areas in which education is important are contracting and licensing.
You already know that to sell life insurance you must have a license.
Beyond that, things can get murky.
These issues are important enough that mistakes can have a damaging effect on how successful you are.
Here’s what you need to know.
The difference between contracting and licensing
Having a license to sell life insurance is just the beginning.
You can’t sell anything without a partnering life insurance carrier.
That’s where the contract portion comes in.
If you request to sell the products and services of a particular carrier and they deny you, you still have a license to sell insurance – but not from that carrier.
Resident license vs. non-resident license
A resident license allows you to sell insurance in the state in which the license was issued.
This license is valid only in that state.
If you want to sell in a different state, you have to get a non-resident license specific to that state.
It’s important to note that your licensing has to be in place before the application is signed or you’ll have to start the entire process over.
Licensing application rules
The rules and regulations here can get tricky, so let’s get some clarity.
You have to be licensed in the state in which an application for life insurance is taken.
But, there are situations where it’s allowable for the prospective client to live in a different state than the one in which the application is taken.
In this case, the individual carrier makes the rules.
Here’s an example.
You’re an insurance producer living in Connecticut. Your friend from Ohio comes to visit you and while they’re with you in Connecticut, they sign an application.
Some life insurance carriers won’t allow a person who lives in Ohio to buy insurance in
This is where things can get messy because some carriers will allow it.
The rules vary from state to state and carrier to carrier.
A General Agency lends clarity
The differing regulations can be nearly impossible to keep track of.
You need to work with a GA that’s ready to answer your licensing and contracting questions before you make a costly mistake.
Key Person Life Insurance
This type of coverage will provide a death benefit to an organization to cover the expense related to finding, training and replacing the key person’s expertise.
The best type of clients to approach with an offer for Key Person life insurance are businesses that employ specialists in a particular area.
Get the conversation started by asking these prospective clients if they have a plan to remain financially stable if one of their crucial employees were to die.
Selling IUL and VUL
One of the most important things to consider when you’re selling life insurance is how to approach IUL and VUL insurance policies.
This is a topic that’s easily complicated.
Fortunately, we’re going to keep it simple.
There’s one question that you should focus on: What’s the goal?
IUL and VUL are both designed to build cash. Make sure the client’s goals match the product’s intent.
Here are five things to know when you’re comparing IUL and VUL, as well as some ways to determine which one is better for your client.
1. You need additional licensure to sell VUL.
As an insurance producer, to sell variable universal life, you must have a securities license in addition to a life license.
You also have to be registered with a broker-dealer.
The reason for this additional licensing is because the underlying subaccounts within a variable life policy are mutual funds.
Regulatory oversight and the need to comply with continuing education requirements continues to be a difficult hurdle for selling VUL.
As a result, many life insurance producers aren’t choosing to renew the required licenses.
Keep in mind – without a securities license, you can’t sell variable life insurance.
2. No additional licensure is required to sell IUL.
Currently, indexed universal life products aren’t regulated by the Financial Industry Regulatory Authority.
That means you don’t need a securities license to sell it to your clients.
3. Licensed insurance producers don’t like to sell either.
The reason you may shy away from offering IUL and VUL is that they both initially seem complicated.
However, with the right guidance and education, it can make a lot of sense for you to sell both of these products.
Understanding IUL and VUL and the situations in which they’re suitable for clients is a key component of making the sale and ensuring the client retains the policy for the long haul.
4. Your clients don’t understand IUL and VUL.
Most clients won’t be able to tell you what they bought after purchasing IUL or VUL insurance.
This doesn’t mean you should stop selling the policies.
Instead, it emphasizes your need to be educated about each of them.
You should know them well enough that you can explain it to your clients in a way that helps them understand.
The most important aspect of selling IUL and VUL is that you’re helping your clients to grasp exactly what it is they’re buying.
It’s not uncommon for the cash value to not pan out as a client is expecting. Explaining as fully as you can will help you to avoid a situation like this.
Additionally, it’s important that you periodically review the policies with the clients. Annually or bi-annually is a good goal.
5. Put the spotlight on cash accumulation.
When the goal is cash accumulation, a minimal death benefit with a maximum premium is a wise approach to take with IUL and VUL policies.
This works well if your client wants to borrow from the cash value or outlives the need for life insurance.
Education boosts sales of IUL and VUL
You need a deep understanding of these policies so you can explain it to your clients.
As their understanding grows, they’re more likely to see the benefits and pull the trigger on securing coverage.
That’s why the support of a General Agency is so important.
A GA provides you with the educational opportunities you need to understand and explain the products and services you’re offering to your clients.
Over time, people’s needs and lifestyles change.
For example, someone might adopt healthier eating habits, start working out and shed a considerable amount of weight.
Changes in marital status are significant life events, too.
These and any other life-shifts your clients experience require a review of their life insurance policy.
Keep in mind that your clients probably won’t come looking for you to make changes to their policies.
It’s your job to find out when they last reviewed and initiate the conversation.
“Living” Life Insurance Benefits
While this video will give you more in-depth information, here are the basic selling points for living benefits.
- It’s economical.
- It can protect your clients from increases in long-term care costs that are likely to continue in the future.
Funding Buy-Sell Agreements
A Buy-Sell agreement is a contract between two parties who own a business together.
It’s a legally binding contract and it controls what will happen to the business in the event one of the owners dies, retires or becomes disabled.
What some people don’t think about is that having the contract isn’t enough – it also needs to be funded.
Help your clients see that the best way to fund their Buy-Sell agreements is with life insurance.
Selling Return-of-Premium and Term Life
Make sure your clients know that they don’t have to die to get back 100% of the premiums they paid into this type of policy.
Even more than making sure they understand, be intentional about the way in which you present the information to them.
Always highlight the benefits.
Watch out for these pitfalls
It’s always good to have a list of don’ts.
Knowing what to avoid can be just as helpful as a nice long list of do’s.
Here are mistakes to be aware of.
- Failing to keep training and learning.
- Not being prepared with the right questions to ask during client meetings.
- Insufficient field underwriting.
- Failing to manage client expectations.
- Not asking for referrals.
Being well-informed is the best way to keep from making these errors.
A General Agency can provide you with the resources you need to stay educated and up-to-date on the latest trends in your industry.
Permanent Life Insurance
Being able to offer clients permanent life insurance as a solution to their problems is a great way to position yourself as an authority with valuable expertise.
But first, you have to learn all the ins and outs of permanent life to be able to properly advise clients. You can give the value and flexibility in a variety of scenarios – like dying too soon, living too long or getting sick along the way.
You see, term life insurance is tough on insurance producers, because only 3 percent end up in a claim. In addition, term rates are already low. It’s like a lose-lose for insurance producers.
By offering a permanent life insurance solution, your clients benefit because they’ll have something in place to use when they need it – and you’ll sell more policies.
- A death benefit that doesn’t expire.
- A rider in case Long Term Care for a chronic illness is ever needed.
- Supplemental income for retirement.
- A Return of Premium feature in case the client changes their mind.
- Guarantees to provide assurances.
Learn to Use Drop Tickets
Processing a life insurance application can be a time-consuming procedure.
There’s a lack of consistency among carriers – which confuses the matter further – and the applications can be 15 or more pages long.
Drop Tickets are making the application process much less of a headache.
The drop ticket process consists of an electronic application that can be processed in less than 30 minutes – quite a switch from the traditional three to five hours the traditional method takes.
Here’s how simple it is:
- Log into iGo (a central portal) on our website.
- Call your prospect.
- Ask them a handful of general questions.
- Set up a time for a telephone interview and exam.
- eSign the prospect’s application.
- Electronically deliver a PDF version of the policy to your client.
Getting educated about the latest tools in your industry will you give you a leg-up on the competition and earn you points with your clients.
Mistakes to Avoid
Some people don’t even purchase life insurance simply because it seems too complicated.
They need your guidance to know the best ways to protect their families.
Part of that process is helping them to avoid errors.
Here are the common life insurance purchasing mistakes to watch out for.
1. Delaying coverage.
As a life insurance producer, you know that it’s best to purchase life insurance coverage while you’re young and still have a lot of pep in your step.
Your prospects don’t necessarily realize this.
It’s your job to help them understand that their rates will rise as they get older and it may be more difficult for them to qualify.
2. Purchasing a term policy that’s too short.
Your clients really need your input here.
Show them how and why buying for the longest term they can afford is the wisest option.
3. Not buying adequate coverage.
It’s hard for the average person to gauge how much insurance coverage they need to replace the financial contribution of the breadwinner.
Don’t let them rely on guessing.
The goal is to have enough money to maintain their current lifestyle.
Make sure they consider that the costs of childcare, housework, laundry and transportation will all likely rise if one spouse is gone.
4. Skipping a yearly review of life insurance coverage.
Life can change in an instant.
Someone may receive an unwelcome diagnosis or they may adopt a healthier lifestyle.
Jobs can be lost or income can increase dramatically.
All of these are reasons that your client may need to adjust their coverage.
Encourage your clients to review their life insurance needs each year to ensure they’re adequately covered.
5. Buying unnecessary riders.
You want to preserve your relationship with your clients.
They trust you and you want to keep it that way.
It’s simple – don’t sell them on something they don’t need.
Modern Training Opportunities
In order to keep up with the latest trends and developments, you have to continuously be engaging in educational opportunities.
There’s no “one-and-done” fix for learning about insurance products and services.
One of the reasons to keep yourself in the loop is so that you can match your clients with the policies that are just right for them.
To do this, you have to stay on top of what individual carriers have available.
Life insurance isn’t one-size-fits-all.
The clients you serve depend on you to match them with the right carrier that offers the best products and services for their needs.
One of the best (and most convenient) ways to educate yourself on the different carriers and their unique products and services is to attend webinars or watch the replays of webinars that have already happened.
Here are some that will be helpful to you as you seek to find the right solutions for your clients.
The bottom line is that your ultimate goal is to give your clients and prospects the right options to protect their families and themselves.
You can’t do your job effectively – or make the sales you need to survive – if you don’t have the necessary training.
At the Leisure Werden & Terry Agency, we place a high value on your continuing education.
Call us and let’s discuss your options today.