Why Are You Still Selling Life Insurance With Lifetime Guarantees?

What You Need to Know

Some clients may need coverage to stay in force at age 90.
Some may have tight budgets and more flexible coverage duration needs.
The author suggests helping clients weigh the costs and the benefits carefully.

Permanent life insurance comes in many forms. Too often, however, clients are presented as if only two types exist: “guaranteed” and “non-guaranteed.”

Whether intentional or not, framing the choice this way creates a false dichotomy and too often leads clients toward solutions that don’t best meet their needs. In my experience, the most successful producers take a different approach.

The first thing they acknowledge is that all products have guarantees, and all products have risks. It does not serve anyone to pretend otherwise.

For example, a product presented as the “guaranteed” option may come with the risk of limiting a client’s ability to adjust their premium funding in the future, or with the risk that the cost is substantially higher than alternatives.

On the other hand, a product presented as “non-guaranteed” might actually guarantee coverage for decades while providing compelling cash value growth potential relative to the “guaranteed” alternative.

The second thing successful producers do is keep it simple, but not too simple. While “guaranteed” vs. “non-guaranteed” is certainly catchy, it oversimplifies the conversation. An alternate approach is acknowledging that tradeoffs are required in life insurance product selection, just as in any other financial decision. Advisors can do this by asking a more impartial and open-ended question: “What’s the best use of your money?”

When the need is permanent death benefit protection, there are typically four different priorities that need to be balanced: maximizing the death benefit, enabling future flexibility, activating living benefits, and finally, what I call “extending the warranty.”

This last one gets at the “guaranteed” question in more neutral terms that a client can easily understand. Just as with a car or a TV set, a life insurance buyer has the option to take a “manufacturer’s warranty” — i.e., the basic no-lapse guarantee — or they can “extend the warranty” and purchase a longer no-lapse guarantee.