Editor’s note: This post was originally published on 8/8/17 and has been updated for accuracy and comprehension.
Did you know that some people don’t buy life insurance just because it seems too complicated?
Buying life insurance can be a confusing process for potential customers.
That’s why they need a knowledgeable life insurance producer – like you – to guide them through the process.
Your job is to help them understand exactly what they need and how you can solve their problem.
A big part of that process is helping your clients avoid these term life insurance mistakes.
Help Clients Avoid Term Life Insurance Errors
1. Waiting too long to purchase coverage
From your perspective as a life insurance producer, it's better to buy it when someone is young and healthy. But not all prospects realize that.
You need to help them understand that their rates will only go up as they age, and it gets harder to qualify for coverage
And a person who waits until they’re facing a serious health crisis to look into life insurance has most likely waited too long.
Show your clients the future value of locking in rates while they’re more affordable.
2. Buying a term policy that is too short
This is an area in which your clients especially need your guidance and expertise.
Many consumers make the mistake of buying a shorter term duration than they should.
For example, they see that a 10-year term life insurance plan is more affordable than a 20- or 30-year term, so they go for it.
They need you to help them understand that buying for the longest duration they can afford is the best option.
Your clients will be in for a big surprise if they need to reapply after 10 years and find that their rates have more than doubled – that’s if they can still qualify!
Don’t let that happen!
3. Not buying a sufficient amount of life insurance
Many of your clients don’t have a true picture of how much life insurance they would need to replace the income of the family’s breadwinner.
The goal is to have enough money to maintain their current lifestyle. A good rule of thumb is to use a simple, online calculator to find that right amount. Otherwise, guessing is likely to be wrong.
It’s common for consumers to purchase life insurance that covers the loss of the main breadwinner’s pay, while neglecting to think about the spouse who stays home with the children.
Gently remind them that if one spouse is gone, costs like childcare, housework, laundry and transportation can increase in order to fill the gaps created by the loss.
4. Neglecting to review life insurance coverage each year
Life has a way of bringing changes that can’t be predicted.
Lifestyle habits can change. Has your customer given up smoking? Have they adopted healthier routines that have resulted in a major weight loss? Have economic factors affected the performance of their in-force life insurance policy?
Encourage your clients to review their life insurance needs with you annually.
You’ll be building trust as you point out ways that they may be overinsured, which can lead to a conversation about where they are underinsured.
5. Purchasing unnecessary riders
To preserve the relationship that you are forming with your clients and provide them with the best value possible, only recommend riders that make sense for their needs and for which there are no other options.
Often, people are talked into options they don’t need by insurance agents who are more concerned with their commission than with doing the best thing for their customer.
Be different. Be honest. Their trust in you will grow as they see that you’re looking out for them.
Make a difference for your clients
You can play a big part in preventing your clients from making costly errors when they purchase term life insurance.
Help them understand that the timing matters and that buying an insufficient amount of coverage for a duration that’s too short could have costly repercussions in the future.
Let them know that you’ll be available to reevaluate their needs with them each year, making sure that they aren’t paying for things they don’t need but that they’re covered for the things that are necessary.
How to help clients avoid term life insurance errors
- Waiting too long to purchase coverage.
- Buying a term policy that is too short.
- Not buying a sufficient amount of life insurance.
- Neglecting to review life insurance coverage each year.
- Purchasing unnecessary riders.