Convertible term question

[lifesettlementadvisor]

What is your usual game plan for convertible term when it is about to expire?

For example:

You sell a 20 year term policy to a 55 year old. When he is in his 70s does he have any options if he cannot afford to convert it or does he lose all the money he has paid in?

 

[CHUMPS FROM OXFORD]

Some term policies are not convertible when they are in their 70s. In some cases, the convertibility ends at a certain age (65). Not all, though.

Sometimes it is best to consider converting just a portion of the amount. The rate can be quite high for a permanent policy for someone in their 70s.

Of course, you can also discuss conversion options with a client every time they get a renewal notice. Often, there is a "voucher" that will pay part of the first year premium. Probably the best time to talk about converting is after the first 3-5 years.

And finally...the term policy may have been initially written to cover a specific situation and nothing else. Therefore, conversion is not a good idea.

 

[lifesettlementadvisor]

So basically the only options are converting or nothing

 

[WBunch]

Some term policies are not convertible when they are in their 70s. In some cases, the convertibility ends at a certain age (65). Not all, though.

Sometimes it is best to consider converting just a portion of the amount. The rate can be quite high for a permanent policy for someone in their 70s.

Of course, you can also discuss conversion options with a client every time they get a renewal notice. Often, there is a "voucher" that will pay part of the first year premium. Probably the best time to talk about converting is after the first 3-5 years.

And finally...the term policy may have been initially written to cover a specific situation and nothing else. Therefore, conversion is not a good idea.

I agree. Most companies have a deadline to convert by 65. The best thing to do with term is to convert in pieces as the years go by.

 

[Newby]

What is your usual game plan for convertible term when it is about to expire?

For example:

You sell a 20 year term policy to a 55 year old. When he is in his 70s does he have any options if he cannot afford to convert it or does he lose all the money he has paid in?

The phrase "loses all the money he has paid in" is not one you should use as a professional agent. Whether or not he converts to a whole life policy, he still does not get his money back he paid for the term.

He didn't "lose" money. He paid for insurance coverage that he recieved.

If you paid your annual car insurance premium last year but didn't wreck your car, you didn't really "lose" the money. You spent the money on protection in case you needed it. You had the benefit of being protected for a period of time.

When Term Insurance clients talk about the money they "lost" on term coverage in the past it is sometimes obvious they didn't understand that the policy they bought wasn't whole-life to begin with. This could mean the agent didn't do his job very well or the consumer made up his mind by listening to an "expert" friend's advice but didn't really understand what he was buying or his other options.

 

[lifesettlementadvisor]

I bring this up, because my corporate office wants us to push buying covertible term policies. I wanted to get all the information before pitching it to my clients.

With out starting a debate on life settlements in general, do yall (as agents) see having a client that doesnt want to convert his term policy to sell it as a Life Settlement as a good or bad strategy?

 

[LGilmore]

"With out starting a debate on life settlements in general, do yall (as agents) see having a client that doesnt want to convert his term policy to sell it as a Life Settlement as a good or bad strategy?"

No arguement. No 100% absolute answer either. I guess it would depend on your offer and their needs. Ya offer enough money, somebody's not going to care.
__________________

 

[WBunch]

Please educate me...As far as my knowledge goes is that a life settlement can be done only on a Cash Value policy. You talk of buying clients convertible term policies. How does the client recieve something for nothing...referring to no cash value in a term policy.

 

[lifesettlementadvisor]

A policy does not have to have a cash value to receive a life settlement. Funders are more interested in the death benefit, life expectancy, and annual premium payments. They are looking to make a ROI of about 10% on each policy. When we work with a convertible term policy we have you create an illustration of the policy after conversion. If we get a buyer for it, then we have it converted before the sale.

 

[WBunch]

Ok that answers my question...I was just wondering how term could be settled...I didn't know that you guys could do that. Very interesting.