As an agent starting out you may get some odd requests. My advice, do your research, discuss your findings with the insured and proceed based on the decision you have agreed to during that discussion.
I had a client early on, she was a young mother like myself. She had problems with her carrier at the time and wanted to bring her business to me. I was elated and wrote her a homeowner, auto, umbrella, and a small collectibles policy. Then, she asked me for a whole life policy, not for herself, but for her two children.
I remember just staring at her for a moment in shock. I was used to speaking to individuals 40 years or older looking to get life insurance protection to help with costs should they pass away. I began to question was she planning on killing her children? Did they have an incurable disease? Questions I thought but didn’t say.
I explained that a term life policy might be a better choice since it’s stated length – 10 or 20 years. By the time it runs out, her kids can purchase their own policy or decide if they want to continue. Term life is also cheaper than a whole life policy. Further, term policies can be level premium where the premium and the death benefit stay the same. But there was no convincing her otherwise.
When I asked why her answer was simple. Whole life accrues cash value. She can use that cash later toward college costs. If the child decides not to go to college, the money can be used for starting a business or technical training.
I did the research and found out – she was right, while life is protection for your entire life, therefore it is much more expensive. Those costs are designed for the higher mortality rate as we get older. In her case, if her children’s growing pains involve any life threatening behavior.
A whole life policy can be used for retirement planning, but using this toward college costs is also a plus as well. For instance, during the 2008-2009 financial crisis, many families bought these policies since they were a safe investment with a guaranteed dividend.
Also consider a 2013 article by ThinkAdvisor that advised 85% of Americans believe having life insurance is necessary, but, as of 2010, only 44% had actually purchased it. Compare that to the 72% who had life insurance 50 years earlier in 1960.
In an effort to attract more customers, many of the life and annuity carriers came up with variations and hybrids based on the whole life and/or universal life policy platform. Who can blame carriers for this type of push when agents and brokers often benefit greatly from the permanent life type policies due to upfront commissions of possibly half the first year premium. It’s not something to ignore
By now, my client’s children are just shy of college age and she is still insured with the carriers I placed her with – albeit, no longer my book. I imagine with the dividends and growth, she is well on her way for paying their entry fees, books and tuition.
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