What’s the biggest life insurance mistake consumers make? Robert LaBonte, CFP, tells you what it is and talks about what shoppers should really be looking for in a policy.
If Robert LaBonte could give life insurance shoppers just one piece of
advice, it’d be this: Hey, there’s more to buying a policy than finding the cheapest price!
"You wouldn’t dream of walking into an auto dealership and saying, ‘I want the cheapest car on the lot.’ Yet, that’s essentially what people do when they shop for life insurance," he says. "They’ve been trained to think there’s no more value to a term policy than the price per thousand dollars of death benefit. Unfortunately, nothing could be further from the truth."
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Blame Spreadsheets
LaBonte blames what he calls the “spreadsheet mentality.” We’ve all seen the newspaper and magazine articles: A 35-year-old male applies for $250,000 of term life insurance. Typically, the consumer is then shown a list of the 10 cheapest premiums based on each company’s "preferred best" pricing for the hypothetical customer.
Even if you try to shop price alone — and you shouldn’t — LaBonte says you’d be chasing an illusion. Once the client goes through the medical exam, lab tests and underwriting, he might slip into the "preferred" or "standard" class, and then the new rate might no longer be the cheapest when compared to the same rate class offered by other companies. What to do then; start the process anew with company "B"?
"Shopping price is complicated by the fact that insurance companies use different underwriting standards in terms of height and weight tables, cholesterol levels, family history and so on. Plus, many of them band coverage at different face amounts," he says. "It’s a moving target."
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The Term Life Checklist
LaBonte’s company has traditionally focused on income annuities and wealth-transfer tools, as well as quality life insurance because "it’s the right thing to do." "Life insurance is a serious financial decision and the foundation of any solid financial plan," he says. "That being the case, I want my clients to look at the policy’s features and value, as well as the quality of the carrier."
Here’s LaBonte’s checklist for what to look for in a term life policy:
- Availability of nonmedical conversion. Not all carriers allow policyholders to convert a term life policy to permanent insurance without evidence of insurability. All of Symetra’s term policies are fully convertible to permanent insurance — without additional underwriting.
- Duration of the conversion period. Many insurance carriers limit the number of years in which a client can convert to a permanent policy without evidence of insurability. All of Symetra’s term policies are fully convertible through age 75.
- Availability of a broad range of quality permanent products to convert to. Even among carriers that allow conversions, some limit the permanent insurance products policyholders can convert to. Symetra’s term life policies are convertible to any permanent policy of your client’s choice with no limitations.
- Financial strength. Life insurance is a long-term promise that requires the backing of a financially strong carrier — a carrier your clients can count on into the future. Symetra Financial and its insurance subsidiaries have $20 billion1 in assets, with top-tier financial strength ratings and nearly a half-century of experience.
As the American population ages, LaBonte says many people will not meet their financial goals. Consequently, they’ll need to carry life insurance a lot longer than they originally intended.
"Without the ability to convert and the maximum timeframe in which to convert, policyholders are being painted into a corner," he says. "I’m not sure I’d be very pleased with my agent if I was nine years into my contract and developed significant health problems only to learn my contract doesn’t allow conversion without evidence of insurability after the eighth year."
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Why offer life insurance?
LaBonte recently talked with the owner of a property and casualty agency about life insurance.
"I asked him how many clients his agency has; about 2,000. Next, I asked him how many people in his agency are responsible for discussing life insurance with clients; just one. And how many clients can this one person possibly sell life insurance to in a year? Turns out this person has other duties, so maybe 50. Well, I asked, what about meeting the life insurance needs of your other 1,950 clients?’"
LaBonte believes this type of life-insurance-as-an-afterthought thinking is part of the reason there are 68 million Americans who are underinsured or uninsured. The cure, he says, is a short, easy, transactional life insurance process.
"An easy, online application makes sense," he says, referring to the Symetra Express quote-and-apply tool, which allows even a novice to close the sale and deliver a certificate of temporary insurance in just 10 minutes.
"A carrier like Symetra that allows people to convert to permanent all the way to age 75 without evidence of insurability; has a fine stable of products clients can convert to; has the financial strength ratings necessary; and a seamless, online application system; is a company I believe has found a way to address the needs of a lot of underinsured and uninsured people," says LaBonte.
Learn how your agency can benefit by adding life insurance in "3 Surprising Ways Life Insurance Can Boost Your P&C Business." Or, contact the Symetra Sales center at invest@symetra.com or 1-800-706-0700.
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Robert LaBonte, CFP, is president and CEO of LaBonte Insurance Marketing Services (LIMS) based in Hampton, N.H. LIMS (www.labonteinsurance.net) specializes in the mature market, with a focus on wealth transfer, capital preservation and conservative growth strategies. |
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