Wednesday, September 28, 2016

Convertible: Not Just for Sports Cars!

By Matt Kaas, Life Marketing Consultant

Convertible. Did you instantly think of the shiny red convertible that you have always dreamed of owning (or may be already sitting in your garage)? Well if you are anything like me, your first thought was convertible and renewable term life insurance, and convertibility options.

Many financial professionals and even more of their clients think that term life insurance is just that: life insurance designed to provide a designated amount of protection for a designated duration, and that it is the cheapest option possible.
With term insurance rates being as competitive as they are, a product spreadsheet listing carriers A through Z by premium might not tell the whole story. The difference between carrier A at $15 a month and carrier B at $17 a month can be much greater than just $2. First and foremost, when you think of term life insurance, think of that shiny red sports car – it may be better if it is convertible! If you and your client have decided that convertible term insurance is the most suitable option for them, here are three key things that you need to look for when helping your clients decide on which convertible term life insurance product they should choose.

  1. How long does the client have to convert? Some carriers require that their policyholders convert their term life insurance to a cash value life insurance product within a designated number of years. This can be as soon as within the first policy year, but typically is within the first five to ten policy years. However, some carriers allow their policyholders to convert for the entire duration of the term.
  2. What cash value products can your client convert to? Does the carrier allow their policyholders to convert to only certain cash value products or can they convert to any cash value product? And does “any cash value product” mean any of the cash value products that the carrier currently offers today, or at the future date when the policyholder decides to convert? These are important questions, as some carriers have less competitive products that they require policyholders to convert to.
  3. Is the face amount fully or partially convertible? Does the policyholder have the ability to convert a portion of their death benefit or are they required to convert the entire face amount? If a policyholder only wants to convert a portion of their face amount, do they keep the remaining face amount of their term insurance through its specified duration or do they forfeit the remaining death benefit? For example, if a client has a 20-year term policy with a $250,000 face amount and in year 5 they decide they want to convert $100,000 to cash value insurance, do they keep the additional $150,000 in coverage for the remaining 15 years of the term?
Determining the right type of life insurance for your client as well as suitable products requires careful consideration of all the features and conditions of the product, the strength of the insurance carrier as well as the client’s financial situation and objectives. For more information on term life insurance, convertibility options, and helping you select the appropriate solutions for your clients, please give me a call at 800.321.3924 x133.

Matt Kaas | Life Marketing Consultant
Ann Arbor Annuity Exchange
Ph: 800.321.3924 x133 | Dir: 734.786.6133

Please note that Ann Arbor Annuity Exchange and its representatives do not give legal or tax advice. Encourage your clients to consult their tax advisor or attorney.

Designed for Financial Professionals.