The Business Life Sale: Module Iv-D

Most P/C agencies that start a brand-new Life department are going to start by selling Personal Life policies-and well they should. Concepts in Personal Life insurance are for the most part easier to grasp. If you start with the average Life producer, he or she will probably be stronger in individual or family insurance marketing. Thus, Personal Life sales will give him or her a good solid base with which to start while learning the broader aspects of the Business Life sale. If, on the other hand, you hire a producer versed in Business Life insurance, he or she will be ready to begin selling to your business clients right away. Remember, in Business Life insurance marketing, you are providing two important benefits to the Life producer: 1) quality leads, and 2) a day-time marketplace (prospects can be called upon during the day, which is often not the case in Personal Life sales).

Whether experienced in Business Life sales or not, the producer you hire should be well-versed in the seven action steps to the sale detailed in this 'Sales and Marketing' section. Why? Because, despite what differences there may be in the products and the use they're put to, when it comes down to it, the sales process for Business Life insurance policies is not much different than that for policies sold for personal purposes.

A review of the action steps, for easy reference as you're reading this section, is appropriate:

This section of 'Sales and Marketing' is designed to take you through these steps from a Business Life insurance point of view, providing new letters, language, and objectives, when appropriate. You'll also find a fact-finding form, the 'Business Life Insurance Review Data Sheet,' to use during the qualifying interview. Before beginning this process, however, we will acquaint you with some of the major types of Business Life insurance sales. You can find more information on the business uses of specific Life insurance products in the 'Sales Campaigns' section under the tabs for particular products.

Following are brief descriptions of some of the Life insurance and related products you're likely to be marketing to your Commercial Lines clients. We should note, however, that the term 'product' may be misleading. What's described below might be more accurately called 'purposes' for various Life products. The actual product used may vary from Term to Whole to Universal Life, and more, depending on the goals (i.e., pure protection, cash-value build-up, and so on). Some business plans also call for Disability Income protection, and of course for Group insurance.

Buy-Sell Agreement: A legal agreement that maps out a plan for the continuation of a business in the event that a major stockholder passes away or becomes disabled. The agreement most often involves Life insurance. Two basic types of these agreements include stock-redemption plans and cross-purchase plans. In a stock-redemption plan, the corporation agrees to purchase stock in the event of a shareholder's death. The agreement is funded by Life insurance on the shareholder. The corporation becomes the owner and the beneficiary of the policy, which is considered a corporate asset. In a cross-purchase plan, shareholders (not the corporation) agree to purchase stock upon the shareholder's death. Each shareholder purchases Life insurance covering the others. Premiums are paid with personal dollars and cash values become personal assets.

Deferred-Compensation Arrangement: An incentive plan that allows an employer to provide certain key employees with compensation at some pre-determined future date. The employee provides the services now with compensation paid at a later date. The plan is funded by a Life insurance policy. The employer buys the policy on the employee's life. At the pre-determined future date (usually retirement), the policy begins paying, out of its cash values, the promised compensation to the employee. If the employee dies before this pre-arranged date, the death benefit enables the company to make the promised payments to the employee's survivors. A deferred-compensation plan provides benefits that will not be taxed to the employee until the benefits are actually received. The employer receives no current income tax deduction for contributions to the plan, but will be allowed the deductions when the benefits are paid out.

Group Life, Health, Disability: Arrangements in which employees of the corporation are provided with Life, Health, and/or Disability insurance whose premiums are paid in whole or in part by the corporation. Some Group plans may be flexible, allowing employees to choose between benefits, and some will involve employees' participation in the premium payment through payroll deduction.

Key-Person Life Insurance: A policy owned by the corporation, of which the corporation is the beneficiary, on the life of a key executive or other person whose untimely loss would cause financial difficulty for the corporation. Policies are taken out on such persons as key executives, valuable researchers, and/or anyone who has a particular skill that makes him or her a valuable asset to the firm. Anyone who is a chief source of the firm's credit is also a candidate for this coverage. The policy serves several purposes: 1) Provides indemnity in case of loss. The insurance proceeds place the firm in a better position to finance replacement of the key person. 2) Accumulates an emergency cash fund (if a permanent Life policy is used). The firm can borrow emergency funds needed (without publicity) from the policy's cash values. 3) Strengthens the firm's credit. Creditors are assured that debts will be paid despite the loss of the key person.

Pension Maximization: Americans due to receive a pension when they retire will have a big decision to make in choosing how to get their benefits. Option 1 is to take the full amount of the pension (usually about 50% of earnings while employed). When the retiree dies, the pension payments stop. Option 2 is known as joint-and-survivorship. When the retiree dies, pension benefits continue to be paid to the retiree's spouse. However, this option will cost about 30% of the Option 1 benefit. Pension maximization is a simple concept that proposes that the retiree have a Life insurance policy that ensures payment to the spouse in case of the retiree's death. With this policy, the first option for pension payment can be chosen without fear of leaving the spouse without an income. And, in many cases, the Life insurance policy costs less than 30% of the pension that would have to be paid if pension benefits were to be continued after death. With Life insurance, the policyholder is in total control of outcome rather than at the mercy of an expensive 'double-dip' in income for which he or she didn't allow.

Salary Continuation Plan: A Disability policy paid for by the corporation and payable to a key employee in the event of disability. The policy guarantees the continuation of the key employee's salary if disability prevents the person from continuing to work in a full capacity. A salary continuation plan serves as a perk for attracting and retaining key executives and employees.

Split-Dollar Life Insurance: A Life insurance plan in which the premium is shared by the corporation and the employee. From the corporation's point of view, split-dollar is an inexpensive way to buy Life insurance for any personal or business need. A contractual agreement is drawn up between the company and the employee to share the ownership rights and death benefits of a permanent Life insurance policy. (Split-dollar won't work with Term insurance because the key to the situation is the policy's cash value.) The company pays the premiums on the policy and the employee pays 'rent'-income tax on the value of the pure insurance protection (IRS' P.S. 58 cost or Term insurance rate). The tax costs the employee less than paying the premium would. The company benefits by having a more attractive benefit package, and will receive a share of the death benefit equal to the premiums it has paid. In the meantime, the company has access to the policy's cash values.

ACTION STEP 1: PROSPECTING

Your P/C database, just as it does for Personal Life prospects, should serve as your major source of leads for Business Life insurance prospects. Other lead sources discussed on pages SM-6 and SM-7 are also viable for Business Life insurance.

Your Commercial Lines CSRs should be trained to watch for situations in which a change in the P/C account can lead to a Life insurance lead. For example, an insured calls to adjust Workers Compensation insurance because a salesperson has been promoted to a top sales management position. This may trigger a need for Key-Person insurance, deferred-compensation arrangements, and more. When informing the client that the appropriate change has been made, the CSR should also ask for the Life insurance appointment (more about appointment setting later). More information on CSR training can be found under 'Training' in the 'Life Personnel' section of this Agent's Guide.

When profiling Commercial Lines prospects, you should look for certain characteristics that make these P/C accounts good Life prospects. If these businesses are your clients, you should already have much of this information on hand. The information listed below will help you in determining which products to market to your client, and can help you in the sales process, too. For each Business Life prospect, you should know:

This information can be gathered by your CSRs, and is probably already in your files for many of your good P/C clients. When the CSRs are gathering this information, or any information in connection with P/C accounts, they should also complete a Life Prospect Profile Sheet, found in the 'Life Personnel' section of this Agent's Guide under 'Training.' More information about situations in which CSRs can provide Life leads to Business Life producers can also be found in that section.

The pre-approach warms the prospect up for the phone call to set the appointment. Although we recommend sending a pre-approach letter to all prospects before attempting to make an appointment, many agencies are successful at making the appointment-setting call without a prior letter. It's up to you. In any case, the basic principles of pre-approach letters were discussed previously on page SM-11. On the following pages, you'll find sample letters directed at Business Life prospects that you can adapt or use in your agency. Letters for specific Life products and their uses in business can be found in the 'Sales Campaigns' sections of this Agent's Guide.

REMARKS: Use this letter to approach Commercial Lines clients who don't have Life insurance with you.

Dear [NAME]:

WE KNOW YOUR BUSINESS...

because we must. You have trusted us with your Business Property and Liability insurance. We can offer you the same benefits for Business Life insurance.

Life insurance can play a key role in the perpetuation of your business if something were to happen to you. Do you have a plan for this perpetuation? If so, are you sure it's up to date? Many recent changes in tax laws could easily make your program obsolete.

Because you're one of our preferred clients, [AGENCY NAME] would be happy to conduct a no obligation review of your business Life insurance needs. Our Life experts have access to the latest information on policies and tax implications, and they can advise you on a program that is tailor-made to your needs.

We'll be calling you shortly to discuss this further and set up an appointment for this important review.

LETTER: Commercial Pre-Approach 2

Dear [NAME]:

We're proud to insure your business. In fact, we consider you one of our preferred clients and, as such, you will be one of the first to be able to take advantage of a new service we're offering. [AGENCY NAME] has succeeded in developing and providing a complete Business Life insurance service, and we want our best clients to see it first.

I have no reason to believe that you are in the market for Life insurance right now. Chances are when you bought Life insurance in the past, you bought it from a reliable company and from someone you knew. So, when you make your next Life insurance purchase, you're likely to do it in the same way.

Depending on the circumstances, we plan to call you for an appointment within the next week. You might say the call will be an effort to 'sell' our agency and to explain our unique Life insurance service to those who qualify for it.

REMARKS: Use this letter to approach Commercial Lines clients who have P/C coverages with you, but not Life insurance.

Dear [NAME]:

You've heard you shouldn't keep all your eggs in one basket. NOT SO! At least, not when it comes to insurance. Customer surveys show that people like to have all their insurance coverages with one agent-it's more convenient and often less expensive. In reviewing your file, I've noticed that we insure your business for [FIRE/LIABILITY/CRIME/OTHER], but we don't carry your Business Life coverages.

Perhaps you weren't aware that we handle all lines of insurance! It has been our philosophy, and a successful one, that we best serve our clients when we serve their every need.

Because you're a valued client, we're asking that you allow us to do a no-obligation review of the Life insurance needs incurred by your business. You benefit in many ways by dealing exclusively with [AGENCY NAME], the most important being that we're concerned that you're properly protected-not only with your [TYPE OF COVERAGE], but also with Life insurance.

I'll be calling you within the next week to set up a time when we can discuss this further. In the meantime, we appreciate your business and look forward to serving your every need.

REMARKS: Use this letter for all Commercial Lines prospects, whether they're already clients of the agency or not.

Dear [NAME]:

Eighty percent of the assets people leave at death consist of Life insurance proceeds. Have you checked lately to ensure that you have the type of Life insurance that best fits your business needs?

Recently, there has been a lot of excitement in the industry over new Life insurance policies. Why are so many business owners replacing their policies, even if they are only a few years old? Many people feel that the newer policies provide enhanced investment and business perpetuation opportunities.

At [AGENCY NAME], we can give you the facts concerning the new Life insurance policies and make sure that the policies are tailored to fit the needs of your business and your perpetuation plan.

Our Life insurance experts have the latest information regarding the newest products. We will take the time to explain your options and advise you so that you can make a well-informed decision.

When it comes to Life insurance, you and your business deserve the best coverage for your dollar. We'll call you in a few days so we can arrange an appointment to discuss this further.

REMARKS: Send this letter to Commercial Lines clients and prospects to show them the necessity of Business Life insurance.

Dear [NAME]:

It's a difficult question for a business owner to face: What happens to the business if you die unexpectedly or are disabled and can't continue your present responsibilities? In the day-to-day flurry of running the business, you may not have time to give well-planned, definitive answers.

That's what [AGENCY NAME] can do for you, with our Business Life insurance program. We can advise you on the types of Life and Disability insurance it takes to successfully plan for a continued, healthy future of your business. The experts in our Life department will analyze your business and provide the best policies to meet your needs in the most economical manner.

Salary continuation plans in the event you're disabled...buy-sell agreements that ensure a smooth buyout of a deceased shareholder's stock...Key-Person insurance on the lives of those executives whose replacement would be costly and difficult...and much more. We have the expertise to show you how these programs work for the benefit of your business.

We'll call you in the next week to see if we can set a time to discuss these programs further. Your business will benefit.

REMARKS: Send this letter to those Commercial prospects who have been referred to you by another client.

Dear [NAME]:

A business community works together to better the business of each member. A member of your community, [REFERRER'S NAME], has decided that [AGENCY NAME] might be able to help your business in the same way we helped [his/hers]. We recently provided [BUSINESS NAME] with a complete, no-obligation Business Life insurance review, and [he/she] found the service quite valuable. [He/she] thought you would, too, and gave us your name.

We realize you probably already have Business Life coverages, and that you no doubt bought it with careful thought from someone you trusted. But even the best of programs can become outdated quickly, especially considering the changing tax environment.

And the Life experts here at [AGENCY NAME] are in a unique position to provide you with the best advice and the latest in coverage recommendations.

You'll find our no-obligation services of value, we're sure. If your present program is meeting all your needs in the most cost-effective way, we won't try to sell you out of it! We're here to serve you. I'll be calling you soon to set up an appointment.

REMARKS: Use this as a general pre-approach letter to all Business Life prospects. This letter can even be used, with a bit of modification, for approaching prospects for the P/C business as well.

Dear [NAME]: