Whole Life Insurance: Module V-F

WHOLE LIFE INSURANCE: MODULE V-F

Whole Life insurance, also referred to as 'ordinary' Life, is the oldest form of permanent Life insurance protection, having been around for more than 200 years. It was invented by a mathematician named William Dodson in the late 1700s as a means by which an insured could buy Life insurance and pay the same premium every year, regardless of advancing age, and could guarantee a death benefit to a beneficiary regardless of when death occurred. The premiums were leveled by averaging in the cost of insuring the risks of older age and by creating a reserve fund (cash value) within the policy that could be invested by the insurance company.

Dodson's model for Whole Life insurance remains much unchanged today. A Whole Life insurance policy's basic characteristics are as follows:

• Level premiums
• Guaranteed cash value
• Guaranteed face amount (death benefit)

An added benefit is that policyholders generally have access to cash values that have built up in their policies via policy borrowing privileges. The rate charged on the policy loan is usually nominal because the Life insurance company will continue to credit the policy's account with the agreed interest rate as if the cash had not been withdrawn.

Also, if the policy is written on a participating as opposed to a non-participating basis, policyholders 'participate' in the policy through dividends. These dividends are only projected (by law they cannot be guaranteed). The policyholder can elect to receive dividends in a number of ways. The dividend can be issued as a check, can be left in the account to accumulate interest, or can be used to purchase additional amounts of paid-up insurance.

If a policyholder decides to discontinue his or her Whole Life policy, the law says he or she is entitled to a certain amount of the policy's reserves. This is known as the non-forfeiture provision of Whole Life. If an insured discontinues a policy, he or she may 'cash it in' for its cash value.

In order to meet the needs of consumers, insurance companies have invented various different forms of Whole Life (some of which are discussed in other sales campaigns). 'Single-Premium,' '20-pay,' 'Endowment'-these are all names that you might hear for Cash-Value policies. Essentially, these policies differ from traditional Whole Life in their premium payment provisions. They offer the policyholder the ability to pay off the premium in a set number of years or periods, instead of over an entire lifetime.

Whole Life is one of the only policies in the industry that comes 'fully' guaranteed. The premium will not change, the face value will not change, and your cash values are guaranteed to be what-ever the insurance company said they would be. Also, the insured can change his or her mind and, through non-forfeiture provisions, cash in the policy. Participating policies have the additional advantage of possible dividends, but these policies generally cost more than non-par policies.

Because of the guarantees offered, Whole Life premiums are higher than those for other types of permanent insurance (such as Universal Life). Also, once the policy is purchased, it cannot be changed, so Whole Life may not look good to the prospect bent on flexibility.

The Life insurance carrier you choose for a Whole Life insurance product should be financially strong and have a good reputation in the industry. We suggest that you select a company with an A + or A rating by Best's. Some other areas to look at include:

1. Service. Prompt, reliable client service is of utmost importance to a good relationship between agent and client and agent and company.
2. 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.
3. Field support. The company should provide you with illustrations and marketing materials. Does the company offer software and training?
4. Comprehensive array of products. Whole Life should be one of many Life insurance products offered by the company to your clients.
5. Policy riders and options. Most companies will provide extra options to Whole Life policies that are available at purchase. Examine options offered by different carriers to determine which one can offer the best overall program to your insureds.

Whole Life prospects include anyone who is in need of permanent insurance. This excludes only those people who truly cannot afford the higher premiums associated with Whole Life and must purchase Term insurance until they are able to convert. Just about anyone else is a possible prospect for this coverage. (More information about prospects for different forms of Whole Life insurance can be found under the 'Single-Premium Whole Life' and 'Excess-Interest Whole Life' campaigns.) Here are some possible sources for these prospects:

1. Your own files-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.
2. 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 pre-qualified, 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.
3. 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 of this Agent's Guide.
4. 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.
5. 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.

You can use many different strategies to sell Whole Life insurance. Here are some suggestions:

1. Conduct a campaign among your current clients and prospects, both Personal and Commercial Lines. Follow the seven action steps outlined in the 'Sales and Marketing' section-send pre-approach letters (you can use Letter WL 1 at the back of this campaign for Personal Lines clients, Letter WL 2 for Commercial). Send only as many letters out in one week as you can follow up within 10 days. Follow with a phone call, and complete the action step process from there.
2. Target Term policyholders for conversion to Whole Life policies. Send a pre-approach letter that briefly explains the advantages of conversion. When making the follow-up phone call, you can use this language as a guide:

   'Hi. My name is [NAME] and I'm with [AGENCY NAME]. You may recall we sent you a letter recently explaining how you could convert your Term insurance policy to a more permanent form of protection, and save yourself money in the long run. We believe this conversion program could really be in your best interest, and we'd like the opportunity to discuss it with you. I'd like to arrange a convenient time to meet. Are mornings or afternoons better for you?'

   Once prospects have come in for the appointment, producers may want to either conduct a complete fact-finding interview, then tailor a policy to fit the prospect's needs, or they might be able to sell the policy in a dominant-needs (one interview) situation. Your 'Sales and Marketing' section has more information on these aspects of the sale.

3. Bring 'new-new' business into the agency by conducting a campaign to sell Life insurance to prospects who are brand new to the agency, using Whole Life as one of the major products in your campaign. For Personal Lines business, send out Letter WL 3, or one similar. Follow up with the rest of the action steps. For Commercial Lines prospects, send out Letter WL 4, and follow up. Notice that the letters call for sending an agency brochure. This is important because the prospects will not know your agency at all, except perhaps by name if you advertise.
4. Go out to new businesses on cold calls and introduce yourself and your agency. A business just starting up is likely to have a need for Business Life insurance plans, and will also be eager to become an accepted member of the business community. Introduce yourself as a member of the Chamber of Commerce, a fellow businessperson. Get to know the new proprietor or manager. Let him or her know right away what you do, and that you might be able to provide assistance in business planning. Whole Life insurance is often ideal for business insurance purposes because of the guarantees built into the policy.

REMARKS: Send this letter to current Personal Lines clients to inform them about your Life insurance services and the Whole Life policies you can offer.

Dear [NAME]:

We like our most valued clients to be fully aware of all the services we can offer. That's why we're writing to you today-you already know we handle Auto and Homeowners insurance, but did you know we can provide complete Life and Health insurance services, too?

Life insurance is an ideal way to protect your family from financial disaster in the case of an untimely loss. And Whole Life insurance, one of the most well-established forms of Life insurance in the business, also has other advantages, guaranteeing your premiums (so you always know how much you'll pay) and building cash values within the policy from which you can borrow (so you know you'll have access to your cash if you need it). Also, the policy provides tax-deferred accumulation of funds-an excellent tool for helping to plan for your retirement.

We'd like to tell you more about the Life insurance programs we can offer.

We'll call you soon to set up an appointment.

REMARKS: This letter is designed to be mailed to Commercial Lines Life prospects who currently have Commercial P/C coverage written with your agency.

Dear [NAME]:

Your business is counted among our most valuable clients. For that reason, we want to be sure you're fully aware of all the services we're able to offer. You obviously know that we can provide the insurance coverage for your business property and liability. But did you also know that we can help with the financial planning and perpetuation aspects of your business?

[AGENCY NAME] has a staff of professional Life insurance experts who can assist you in planning for and funding buyouts, in protecting your business from the loss of key executives, in providing Disability and other benefits, and more.

We are particularly pleased to have available one of the strongest Whole Life insurance policies in the business. Whole Life insurance is often an ideal vehicle for business planning strategies because it comes with guaranteed premiums (you can plan for its expense) and guaranteed face value and cash values (you know exactly what you will get out of the policy, and you have cash available for use in emergencies). Also, it provides for tax-deferred cash accumulations.

You'll hear from us soon-we'd like to discuss this further with you.

REMARKS: Use this letter for Personal Lines prospects who at present do not have any coverages with your agency.

Dear [NAME]:

WE KNOW YOU VALUE YOUR LIFE

That's why [AGENCY NAME] is here to provide not only Homeowners and Auto insurance, but Life and Health insurance services as well. We've been providing quality insurance programs to the residents of [AREA] for [NUMBER] years, and we'd like to count you among our valued customers.

In fact, we'd specifically like to talk to you about a special Life insurance program we have prepared. This Whole Life insurance provides a guaranteed premium that won't change no matter how old you get, plus a guaranteed death benefit and the advantages of building cash values in your policy, which you can borrow in time of need. Also, the policy provides tax-deferred accumulation of funds-an excellent tool for helping to plan for your retirement.

The professionals at [AGENCY NAME] would be pleased to get to know you and help you put together a complete, cost effective, total insurance program to meet your needs. To help you get to know us, we've enclosed a brochure that describes our services. We'll call you soon to talk further.

Enclosure

REMARKS: Send this letter to businesses in your area that are not yet insured for any coverages with your agency.

Dear [NAME]:

IT'S TIME TO FACE FACTS . . .

and the facts are that business owners pass away, leaving other owners, shareholders, and families of the deceased to cope with the loss . . a tough enough task just emotionally. But there will also be a financial loss, not only to the family but also to the firm. Is your business equipped to deal with such a loss?

[AGENCY NAME] has been helping businesses in [AREA] to plan for such contingencies for more than [NUMBER] years. We'd like to count your business among our valued clients, and that's why we want to tell you about a special Whole Life insurance policy that can provide the funding for business continuation plans, for the recovery from the loss of a key executive, for executive compensation, and much more. The professional planners in our office can tailor a policy to fit your needs.

We'll call you soon to tell you more about our agency. Meanwhile, take a look at the enclosed brochure to learn more about the services that our business can offer your business.

REMARKS: Use this letter and business reply card in a direct mail campaign directed at all prospects in your area, both Personal and Commercial Lines.

Dear [NAME]:

IT'S TIME TO TAKE ADVANTAGE!

Now you can get the expert services of planning professionals from [AGENCY NAME]. We offer full lines of insurance, including Life and Health, and today we're featuring a special Whole Life insurance policy that can meet your every Life protection need, from personal to business.

Our Whole Life policy features LEVEL PREMIUMS, meaning you can plan for how much you pay. You also get GUARANTEED CASH VALUES that can be used, via borrowing, as a source of emergency funds. And that's not all. The face amount of the policy is also GUARANTEED, meaning you know the policy will serve the purpose you bought it for-to provide protection for your family and business in case of untimely death. PLUS, the policy provides tax-deferred accumulation of funds-an excellent tool for helping to plan for your retirement.

Take advantage of your opportunity to get expert financial planning assistance in your personal and business life. Return the enclosed reply card today, and we'll get started right away!

YES! Tell me more about your services. I'm interested in:

[ ] Business Life insurance coverages

[ ] Personal Life insurance coverages

[ ] A total protection plan for my business and family

NAME: _____________________________________________________

BUSINESS NAME:____________________________________________

ADDRESS: __________________________________________________

CITY/STATE/ZIP: ____________________________________________

PHONE NUMBER: (_____) _____________________________________