As an agent selling life insurance, understanding the variety of products available is essential to meeting the diverse needs of your clients. Life insurance policies can range from simple term life insurance to more complex options like variable life insurance. Each type of policy has its own set of features, benefits, and ideal customers. In this article, we’ll explore five different types of life insurance that you can offer this year: Term life insurance, Whole life insurance, Universal life insurance, Variable life insurance, and Burial insurance.
1. Term Life Insurance
Ideal For: Most people, especially those looking for affordable and straightforward coverage.
Overview: Term life insurance is one of the most straightforward and affordable types of life insurance. It provides coverage for a specified term, typically ranging from 10 to 30 years. The primary purpose of term life insurance is to replace the policyholder’s income in the event of their death.
Key Features:
- Coverage Length: Temporary, usually 10, 20, or 30 years.
- Cash Value: Does not build cash value.
- Death Benefit: Fixed amount.
Benefits:
- Affordability: Term life insurance premiums are generally lower than those of permanent life insurance policies, making it accessible for most people.
- Simplicity: The policy is easy to understand, with a fixed death benefit paid out if the policyholder dies within the term.
- High Coverage Amounts: Policies can offer significant death benefits, often up to several million dollars.
Considerations:
- No Cash Value: Unlike permanent life insurance, term policies do not build cash value.
- Coverage Ends: If the policyholder outlives the term, the policy expires without any payout.
Selling Points:
- Emphasize the affordability and simplicity of term life insurance.
- Highlight how it can provide financial security during the policyholder’s prime working years.
- Point out the high coverage amounts available to meet substantial financial needs.
2. Whole Life Insurance
Ideal For: Individuals looking for a straightforward permanent policy and willing to pay higher premiums for lifelong coverage.
Overview: Whole life insurance is a type of permanent life insurance that provides lifetime coverage, as long as premiums are paid. It is a “set it and forget it” option that guarantees a fixed death benefit and builds cash value over time.
Key Features:
- Coverage Length: Lifetime.
- Cash Value: Builds cash value.
- Death Benefit: Fixed amount.
Benefits:
- Lifetime Coverage: As long as premiums are paid, the policyholder is covered for their entire life.
- Guaranteed Cash Value: The policy accumulates cash value at a guaranteed rate.
- Fixed Premiums: Premiums typically remain the same throughout the life of the policy.
Considerations:
- Cost: Whole life insurance is usually more expensive than term life insurance.
- Complexity: While simpler than other permanent options, it’s still more complex than term life insurance.
Selling Points:
- Emphasize the guaranteed lifelong coverage and fixed premiums.
- Highlight the policy’s cash value component and how it can be borrowed against or withdrawn.
- Appeal to clients looking for a stable, predictable insurance option.
3. Universal Life Insurance
Ideal For: People seeking flexible permanent life insurance that can adapt to their future financial needs.
Overview: Universal life insurance is a type of permanent life insurance that offers flexibility in premiums and death benefits. It includes a cash value component that grows based on market interest rates.
Key Features:
- Coverage Length: Lifetime.
- Cash Value: Builds cash value based on market interest rates.
- Death Benefit: Flexible amount.
Benefits:
- Flexible Premiums: Policyholders can adjust their premium payments within certain limits.
- Cash Value Growth: The cash value grows based on market interest rates, potentially providing higher returns.
- Adjustable Death Benefit: The death benefit can be adjusted to meet changing needs.
Considerations:
- Market Risk: The cash value growth is not guaranteed and depends on market performance.
- Premium Increases: Premiums may increase over time, requiring higher payments or reducing the death benefit or cash value.
Selling Points:
- Highlight the policy’s flexibility in premium payments and death benefit adjustments.
- Emphasize the potential for higher cash value growth compared to other permanent policies.
- Appeal to clients looking for a policy that can adapt to their changing financial circumstances.
4. Variable Life Insurance
Ideal For: Clients with a higher risk tolerance who want greater control over their cash value investments.
Overview: Variable life insurance is a type of permanent life insurance that allows policyholders to invest the cash value component in various investment accounts, such as stocks, bonds, and mutual funds.
Key Features:
- Coverage Length: Lifetime.
- Cash Value: Builds cash value based on investment performance.
- Death Benefit: Flexible amount, typically with a guaranteed minimum.
Benefits:
- Investment Control: Policyholders have the ability to choose and manage their investments.
- Potential for High Returns: If the investments perform well, the cash value and death benefit can increase significantly.
- Guaranteed Death Benefit: Most policies offer a minimum guaranteed death benefit regardless of investment performance.
Considerations:
- Market Risk: The cash value can fluctuate daily based on market performance.
- Complexity: Requires active management and understanding of investments.
- Fees and Charges: Often comes with higher fees and charges compared to other types of life insurance.
Selling Points:
- Emphasize the potential for higher returns through investments.
- Highlight the control policyholders have over their cash value investments.
- Appeal to clients comfortable with market risk and seeking a policy with investment growth potential.
5. Burial Insurance (Final Expense Insurance)
Ideal For: Individuals who want to cover their funeral, burial, and other end-of-life expenses without burdening their family.
Overview: Burial insurance, also known as final expense insurance, is a small whole life insurance policy designed to cover funeral and burial costs, as well as other end-of-life expenses.
Key Features:
- Coverage Length: Lifetime.
- Cash Value: Builds cash value.
- Death Benefit: Fixed amount, typically ranging from $5,000 to $25,000.
Benefits:
- Guaranteed Death Benefit: Provides a guaranteed death benefit to cover final expenses.
- No Medical Exam: Generally, no medical exam is required, making it accessible to seniors with pre-existing conditions.
- Affordability: Lower coverage amounts make the premiums more affordable.
Considerations:
- Limited Coverage: The death benefit is relatively small compared to other life insurance policies.
- Waiting Period: Some policies have a waiting period of two or three years before the full death benefit is payable.
Selling Points:
- Highlight the ease of obtaining coverage without a medical exam.
- Emphasize the importance of planning for end-of-life expenses to ease the financial burden on loved ones.
- Appeal to seniors and those looking for an affordable, straightforward policy.
As a life insurance agent, offering a diverse range of policies allows you to meet the unique needs of different clients. From the affordability and simplicity of term life insurance to the investment opportunities of variable life insurance, each type of policy provides distinct benefits. Understanding these options will enable you to guide your clients effectively, ensuring they find the right coverage for their specific needs. This year, continue to educate your clients on the various life insurance products available, helping them make informed decisions for their financial future.
Additionally, you can use with your clients virtual calculators, such as the one available at Policygenius, to estimate their coverage needs and explore their options more effectively.
