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If your clients are healthy, don’t sell them permanent insurance—at least not yet.

Right now, these policies are expensive. But they will get cheaper; perhaps sooner than later.

As the world hovers in low-interest-rate purgatory, and carriers either pull or hike premiums on long-tail products that have become unprofitable, advisors must play it straight with clients who may not need life insurance right away.

I know what you’re thinking. Anything can happen. Clients need coverage. Risk is risk.

All that’s true, but client needs are changing. A lot of people in their 20s don’t yet have families or houses to protect. Sure, they could name a favourite charity as beneficiary, but for most clients that’s an add-on sale.

So probe into clients’ lifestyles and family histories to see if they’ll be at risk soon, or can improve their health further. You may want to refer them to nutritionists or personal trainers so they’ll stay insurable. And show younger clients the ages at which various insurance rates typically go up, so they know their purchasing deadlines.

While younger clients wait, focus on older clients who need but can’t currently pay for permanent policies, and may soon face uninsurability. Work with older clients to place term policies, for which premiums are currently affordable, and that can be converted to permanent products once interest rates rise. It’s happened before, as more experienced advisors may remember.

Flat interest rates dogged insurers in the 1950s, but were followed by drastic hikes in the 1970s and 1980s.

When that happened, agents were able to tell clients, “If you stop paying your policy and we take the cash value out, I can double the amount of insurance you have and you never have to pay another cent. Or, you can keep paying $2,000 per month.” Wouldn’t you love to be able to say that to a client in 2021?

Thanks to new accounting rules, insurers face price pressures that stem from more than just interest rates, but they’re also streamlining operations. Plus, people are living longer. And once one company lowers premiums in response to rising interest rates, the rest will follow.

So while you’ll take a comp hit on term policies today, rewriting the business when rates leap higher will make clients happy (and put money in your pocket).

For all this to work, you’ll have to level with clients about cost, because many don’t know we’re in a high-priced era that won’t last indefinitely. Show them the costs of T10, T20, T100, UL and WL. Explain the pros and cons of each.

For some, even term can seem out of reach. But if you’re worried about clients’ future insurability, show how buying now can save them money in the long run.

Everybody wins.

Melissa Shin is the managing editor of Advisor Group.

Originally published in Advisor's Edge

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