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After the Life Insurance Sale: Can You Defend Yourself?

Do you offer clients a summary of the policy after a sale?

That’s great. But it’s not enough.

In today’s society, it’s more important than ever to do all you can in order to defend against unwarranted litigation.

In the life insurance business, it’s become all too apparent that with the complexity and flexibility of our products (i.e. universal life, indexed universal life and variable life), you should avoid client misunderstandings at all costs.

Many life insurance producers already take the simple step of presenting a summary of the sale, in writing, to the policy owner so that there are no misunderstandings.

Unfortunately, this kind of summary usually only covers what was included in the sale but not what was NOT included in the sale and the policy.

This can have a disastrous outcome for you as the sales representative.

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Here’s What Happens

A case in point is a situation that I learned about over 15 years ago.

A prominent career life insurance producer had sold his client a life insurance policy.

During the sales process, the producer offered the client most, if not all, of the features in the policy.

This included things like waiver of premium, accidental death and a children’s rider.

Each time the producer talked about the benefits of the additional features, the client showed little interest and ultimately decided not to include any of them in his policy in order to keep the cost down.

After the policy was put in force, the insured subsequently became disabled and had trouble paying the insurance premiums.

Someone told the insured that many policies contain a feature where the premiums are waived upon disability.

The insured contacted the producer and inquired as to how they could execute this feature.

Obviously, since the insured elected not to take the waiver of premium benefit at time of sale, there was no waiver of premium available to them.

As is often the case, the insured had selective memory and suggested that the feature was never presented at the time of the sale.

Unfortunately, the producer had no record that indeed he had presented it as an option and the client elected not to purchase it.

The agent’s defense was that the application spoke for itself, and when signed by the insured, it only included those features that the insured was interested in.

The client, on the other hand, use the age-old defense of, “I depended on the producer to properly fill out the application and trusted that he did so when I signed it.”

Frankly, the outcome of the case is not what’s most important for the purpose of this blog.

The fact is, it was the producer’s word against the insured’s that additional features, other than death benefit, were ever discussed at point-of-sale.

Defending Yourself After the Sale

The good news is that the solution to this problem is an easy one and the life insurance producer immediately employed it.

You can also defend yourself after the sale.

Present your client with a form at the close of sale, listing each and every optional feature that the policy offered.

Next to each feature, there are two boxes. One indicates that the client wants to include the feature within their policy and the other indicates she does not.  

At the bottom of the form, the verbiage should indicate that each of the above mentioned features has been presented to and discussed with the client during the sales process.

There is also a signature line will the client would attest to the information on the form.

This is an easy solution every insurance producer can use to avoid misunderstandings and potentially false accusation regarding cost-saving decisions by the client at the time of sale.

(Of course, with the increased use of digital tools, a much better record can be kept and referred back to in the case of a dispute.)

Even if you’ve never faced this situation in the past, consider utilizing it to protect against unwarranted litigation.

Case closed.

Originally published 7/16; Updated 4/21

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