Excess-Interest Whole Life: Module V-A

 

EXCESS-INTEREST WHOLE LIFE: MODULE V-A

 

THE COVERAGE

Excess-Interest Whole Life insurance is one of those products that few people know about-or know well. It's known by a variety of other names, some of which are specific product names given by carriers, and others that are more generic, such as Interest-Sensitive Whole Life. But the product itself, by whatever name, is not that complicated. In fact, it is very similar to Universal Life, one of the hottest Life insurance products on the market.

Excess-Interest Whole Life, as the name suggests, is a form of Whole Life insurance. Whole Life is a permanent form of Life insurance that can be paid either for the remainder of the insured's life or until the expiration of a stated period. Excess-Interest is the interest-sensitive version. The cash value of an Excess-Interest Whole Life policy is a combination of principal and a declared rate of interest, which is announced once a year by the insurance company. The account will earn interest at that declared rate during its policy year. A minimum interest rate, usually 4%, is always guaranteed.

Policy's Cash Values Increase

The premiums of an Excess-Interest Whole Life policy will remain level-they can't be adjusted up or down, as with Universal Life premiums. However, the policy's face amount can either remain level or increase, based on the type of policy purchased. And, most importantly, the cash values will continue to increase. Some Excess-Interest Whole Life policies pay cash values in addition to the death benefit.

As stated earlier, Excess-Interest Whole Life premiums must remain level. If a client purchases $100,000 worth of Life insurance, he or she is guaranteed to receive at least that amount, provided no borrowing takes place. If the policyholder wants to withdraw money from the policy, it must be done in the form of a loan.

Easy-to-understand Life Insurance

Excess-Interest Whole Life was created because the concept of dividends and interest became so complicated. Money collects in an Excess-Interest Whole Life account as a combination of principal and a declared rate of interest. The straight interest rate declared by the insurance company makes Excess-Interest policies easy to understand.

Another big selling feature of Excess-Interest Whole Life is its ability to accumulate funds without taxation. As long as the money stays in the account, it is not taxed.

Some Policies Offer Choices

Some policies offer the choice of either a level death benefit or an increasing death benefit. The increasing death benefit pays back the level death benefit plus the accumulated cash values. For example, a $500,000 policy with a cash value of $50,000 would pay out $550,000.

Excess-Interest Whole Life policies can have riders attached. Policyholders can add Accidental Death or Disability Income. Premiums can also 'vanish,' which means that if projected interest rates remain the same, the policyholder may be able to stop paying premiums after a certain projected period while the interest rate takes over the payments. On the other hand, if the interest rate drops before the premium is set to vanish, the premium won't vanish. If the interest rate drops after the premium has vanished, the premium may reappear.

PROS

Excess-Interest Whole Life is a fairly simple product for agents to explain to prospects. Its interest-sensitive nature is also a plus for clients, who benefit from its tax-free (or tax-deferred) fund accumulation, and agents, who benefit from having satisfied clients.

CONS

The lack of flexibility makes Excess-Interest Whole Life less attractive to clients than, for example, Universal Life. This lack of flexibility also applies to fund withdrawal. Excess-Interest Whole Life policies allow policyholders to borrow money only in the form of a loan.

HOW TO CHOOSE AN EXCESS-INTEREST WHOLE LIFE CARRIER

Because Excess-Interest Whole Life insurance relies on interest rates, a company marketing the coverage should have experience in investing for interest-sensitive products. The following list highlights those areas that should be considered when looking for an Excess-Interest Whole Life insurance carrier:

• Investment track record. How has the company done on past investments? What is its track record on other products? Look for a company with a strong investment strategy and expertise. What is the carrier's investment philosophy? The company's investment ability is important to the success of an Excess-Interest Whole Life program. Look for a company that has a reputation for offering highquality products and providing quality service to both agents and policyholders.
• Service. What is the company's track record on servicing? Prompt, reliable client service is crucial to a good relationship between agent and client, client and company, and agent and company. The administrative support service should be good, as well.
• Financial strength. Evaluate the carrier's stability and reliability. Look at the carrier's ratio of surplus to liability, its ratings, interest rates, charges, loads, and surrender fees. Find out what interest rates are currently being paid on earlier generations of Excess-Interest Whole Life.
• Field support. Look for a company that will provide you with illustrations and marketing tools. Does the company offer software and training?
• Comprehensive products. The carrier should offer several different types of Life products, at the very least. Look for a carrier that offers a wide variety of Life and financial services products to handle all your clients' needs.

PROSPECTS

Excess-Interest Whole Life prospects are not too different from regular Life insurance prospects and clients. A good Excess-Interest Whole Life prospect is in need of permanent Life insurance, but would like the added sophistication of an interest-driven product. Such prospects include professional singles, families, business owners, and just about anyone in your Personal Lines and Commercial Lines files who needs Life insurance. Here are some ideas on where to find prospects for this coverage. You'll find more information on general prospecting techniques under 'Action Step 1--Prospecting' in the 'Sales and Marketing' section of this Agent's Guide.

• Your own files: These are the perfect place to start your Excess-Interest Whole Life marketing campaign. Start off with those clients with whom you've developed a relationship-anyone with two policies or more. Commercial Lines and Personal Lines files are both good sources. Send out a pre-approach letter (Action Step 2--see the letters at the back of this campaign) to only as many prospects as you can follow up on each week. You can have your CSRs pull names alphabetically or by some other order.
  
• Centers of influence: Develop a professional relationship with an attorney's office, a bank, a real estate agency, or an accountant. These professions, called 'centers of influence' because they serve an important, financially influential position for many people, can help you find prospects. By developing a client exchange with one or more of these centers, you may have more prospect names than you can effectively handle. These names are also prequalified, in that their affiliation with an attorney, bank, real estate agency, or accountant tells you they have money, a home, or some other important asset and so have a need to protect this asset with Life insurance.
  
• Referred Leads: Ask your current clients for referred names. These are great prospect sources, since you have some connection with them through your clients. For techniques, see 'Action Step 7--Obtaining Referred Leads' in the 'Sales and Marketing' section.
  
• Advertising: Simple newspaper advertisements can put your name in front of hundreds or thousands of prospects. Use the ad to focus on one campaign your agency is performing or as a general information ad. Also consider radio and television advertising. While these may be more costly, you may find they generate calls from the people you want to reach.
  
• City and county files: Look through city and county files for names of people who have recently purchased property in your area. You can also discover who has applied for a business license.

 

SALES STRATEGIES

There are a number of ways to sell Excess-Interest Whole Life insurance.

Here are some suggestions:

1. Make it the agency's goal to let every current Personal and Commercial Lines client know about Excess-Interest Whole Life. Send five to ten pre-approach letters (you can use Letter EI 1 at the back of this campaign) a week to clients outlining your agency's services, including your Excess-Interest Whole Life product.

Follow up the letters with Action Step 3 in your sales process, the phone call to set the appointment. Use the language provided for this step under 'Action Step 3--Setting the Appointment' in the 'Sales and Marketing' section, or use this specialized language for Excess-Interest Whole Life products:

'Hi. My name is [NAME] and I'm with [AGENCY NAME]. Is this a convenient time to talk? [PROSPECT NAME], you may recall we sent you a letter recently explaining our agency's services and, in particular, a Life insurance product called Excess-Interest Whole Life. The purpose of my call is to arrange a convenient time when we [OR PRODUCER'S NAME] might meet. Are mornings or afternoons better for you?'

If your plan is to sell Excess-Interest Whole Life in a dominant-needs situation (one sales call, not two), ask a few qualifying questions on the phone to help prepare the producer for the presentation. These questions should include:

• Do you own your own home?
• Are you married?
• Do you have children?
• What debts, such as a mortgage, do you have?
• Do you currently have Life insurance?
• (If yes) When is your next premium due?

This preliminary information will give the producer some idea as to the extent of the prospect's needs. Armed with these facts, the producer can make a presentation (Action Step 5).

Or, the producer can go through the qualifying interview process as described under 'Action Step 4--The Qualifying Interview' in the 'Sales and Marketing' section, and set a separate appointment to close the sale of the Excess-Interest Whole Life policy.

By clearly explaining what Excess-Interest Whole Life insurance can provide the prospect, the producer can usually make the close. Don't forget to ask for referrals from clients after they've been sold (Action Step 7).

1. If you have already sold some Term Life insurance, or know policyholders who have Term Life with another agent, have your CSRs pull the names of all Term Life policyholders. These policyholders can be converted to permanent Life insurance. Send a pre-approach letter (you can use Letter EI 2) to these policyholders explaining a little about this type of Life insurance. Emphasize its benefits and let them know you will be calling them for an appointment (Action Step 3).

   When the CSR or producer calls, you can use this script, which has been customized for the Excess-Interest product:

   'Hi. My name is [NAME] and I'm with [AGENCY NAME]. Is this a convenient time to talk? [PROSPECT NAME], you may recall we sent you a letter recently explaining a Life insurance product. We know you currently have a Term Life insurance policy, but we feel this interest-sensitive Life policy might be more to your advantage and would like the opportunity to further explain it to you.'

   'The purpose for my call is to arrange a convenient time when we [OR PRODUCER'S NAME] might meet. Are mornings or afternoons better for you?'

   The caller can then ask the prospect the questions found in the first sales strategy, in the case of dominant-needs sale, or can leave it at that and let the producer do the fact-finding.

   During the presentation (Action Step 5), the producer can show illustrations comparing the client's current Term Life insurance with Excess-Interest Whole Life.

2. If you have the time and the staff, you can take the sale more slowly, planning for two-call sales. This is a good way to approach a prospect who has never done business with your agency. Using letter EI 3, send pre-approach letters (a few at a time) along with an agency brochure. This is Action Step 2 in your sales process. On the follow-up call to set the appointment, the CSR or producer may say:

   'Hi, this is [NAME] with [AGENCY NAME]. Is this a convenient time to talk? Okay, [PROSPECT NAME], you may recall we sent you a letter recently explaining a little about our agency and, in greater detail, about a type of Life insurance. I'm calling to find out when we might meet to discuss your Life insurance needs. We're excited about this new Life insurance and we think you will be, too. Are mornings or afternoons better for you?'

   At the qualifying interview, the producer performs the fact-find, as described under 'Action Step 4--The Qualifying Interview' in the 'Sales and Marketing' section. At the interview's conclusion, the producer sets up the next appointment. The second appointment, then, is to present the proposal (Action Step 5) and close the sale. Be sure to ask for referrals (Action Step 7) and send them a thank-you letter (use Letter EI 4) reminding them your agency can handle all their insurance needs.

3. Some agencies have telemarketing departments. This works well when there are a number of producers who can check in during the day to collect their appointments. Send a direct-mail letter.
4. Then have the telemarketers follow up by calling prospects for appointments. Provide the telemarketers with preliminary information that should be known prior to the financial planning interview.

The producer will need the fact-finding sheet to aid in the qualifying interview. A sample fact-find can be found under 'Action Step 4: The Qualifying Interview' in the 'Sales and Marketing' section. At the appointment, the producer establishes trust and moves to a comprehensive fact-finding interview. With the agreement of the prospect, the producer then sets an appointment for a presentation (Action Step 5). If the presentation goes well and the policy is sold, another appointment should be scheduled for policy delivery (Action Step 6). At that step, the producer then asks for referrals (Action Step 7).

LETTER: Excess-Interest Whole Life (EI 1)

REMARKS: This letter goes out to all current clients. Remind them that your agency can handle all their insurance needs, then go on to explain Excess-Interest Whole Life. Don't forget to follow up.

[DATE]

[NAME]

[ADDRESS]

Dear [NAME]:

You're a valued client of [AGENCY NAME]. That's why we want you to know that we can handle all your insurance needs. Personal insurance, Business insurance, Life and Health insurance, financial services-all are available to you to make your insurance shopping easier.

We'd also like to let you know about Excess-Interest Whole Life insurance, a form of Life insurance that pays interest on your premiums-which accumulate tax-free. If your Life insurance isn't making money for you, it may be time to reassess your policy.

Take advantage of this opportunity to have your Life insurance program evaluated-free! We'll look at your needs, your current Life insurance, and let you know whether you have too much, not enough, or just the right amount of Life insurance. You'll also see how Life insurance can work for you. We'll be calling you soon for an appointment.

Sincerely,

[AGENT NAME]

 

LETTER: Excess-Interest Whole Life (EI 2)

REMARKS: If you have a Life department, send this letter to your Term Life insureds offering them an upgraded Life insurance program.

[DATE]

[NAME]

[ADDRESS]

Dear [NAME]:

FEEL A LITTLE BEHIND THE TIMES?

Even if you don't feel left behind, you may be. Our records show you currently have a Term Life insurance policy with us, which means you may not be getting enough out of your Life insurance program.

[AGENCY NAME] has a new product, Excess-Interest Whole Life insurance, that not only provides you with permanent Life insurance, but also offers a competitive interest rate on your policy. With Term Life insurance, you get neither benefit.

Time changes situations quickly. You can come in for a free Life insurance review. We'll discuss your current insurance needs and let you know what type of Life insurance best suits your needs. Your current policy may be the most sensible Life insurance for you but, then again, it could end up costing you more in a few years.

We'll be calling you soon for an appointment to take advantage of this free service.

Sincerely,

[AGENT NAME]

LETTER: Excess-Interest Whole Life (EI 3)

REMARKS: Send this general pre-approach letter to all prospects. Follow up.

[DATE]

[NAME]

[ADDRESS]

Dear [NAME]:

HOW'S YOUR LIFE?

Life insurance, that is. A good Life insurance program is vital to your financial plans. Life insurance is designed to protect your family in case you're no longer here, but these days Life insurance can do more.

For example, Excess-Interest Whole Life insurance can pay you for having Life insurance. How does it work? It's simple: For a flat premium rate, you can purchase an Excess-Interest Whole Life policy and get Life insurance plus a declared, competitive interest rate on your insurance.

How many other types of insurance can do that for you? We're offering a special Life insurance review, but you'd better hurry! It ends soon.

We'll call you soon to set up a convenient time for you to come in for your no-obligation Life insurance review.

Sincerely,

[AGENT NAME]

 

LETTER: Excess-Interest Whole Life (EI 4)

REMARKS: Send this thank-you letter to clients who've just purchased Excess-Interest Whole Life. It also offers a gentle reminder that you can handle their other insurance needs, as well.

[DATE]

[NAME]

[ADDRESS]

Dear [NAME]:

Thank you for your business! [AGENCY NAME] and I appreciate having you as a client and we look forward to working with you.

Because I'm not always in the office, please feel free to call [CSR NAME] if you have any questions about your Excess-Interest Whole Life policy. Of course, I'll also be able to answer any questions you might have, as well.

And remember, we can handle all your insurance needs, from Personal and Business insurance to Life and Health insurance and financial services. Just give us a call for more information.

Thank you again.

Sincerely,

[AGENT NAME]

 

LETTER: Excess-Interest Whole Life (EI 5)

REMARKS: This is a general direct mail pre-approach letter for Excess - Interest Whole Life.

[DATE]

[NAME]

[ADDRESS]

Dear [NAME]:

IT'S TIME FOR YOUR CHECK-UP

You may not realize it, but Life insurance should be reviewed regularly, just as you have a regular physical. Our lives are in a constant state of change. Children are born, reach college age, houses are added to, salaries increase. Each of these changes requires additional protection.

That's why a regular Life insurance review is a good idea. If you haven't had your Life insurance program reviewed lately, it's probably time. In fact, you may not have heard about the new Life insurance products that can pay you interest, tax-free!

If you want to learn more about these new Life insurance products, or you want a no-obligation Life insurance review, we're here to help.

We'll call you soon to set up a convenient appointment time.