Questions about simplified issue policies

[New Ins Dude]

Hey everyone, I was approached a few months ago about becoming a life insurance agent. The money sounded good so I've been looking into it, got my license, and have been contracted to sell through several carriers.

Since I jumped in quickly, I wasn't fully aware of what I was doing, but now that I have a decent grasp of what's going on, I'd like to address some concerns. Firstly, the company I work for is focusing on selling simplified issue whole life insurance policies. The original strategy I was told was to focus on seniors with health problems who think that they either don't qualify for fully underwritten policies or think they have limited options. I'm coming to realize that this may not always be the case and to not be aware of the general purchasing strategies of other types of customers could be doing people a huge disservice.

Question 1: I'm getting conflicting messages about the underwriting standards for simplified issue term life and simplified issue whole life. The claim from my manager is that simplified issue term life has stricter underwriting so it is easier to place someone in simplified issue whole life. I've heard from other sources that the underwriting for term and whole is generally the same. Does anyone on here actually have the qualifications to clearly claim if underwriting for simplified term versus simplified whole is a real concern(not guaranteed issue, I understand what is happening with guaranteed issue)? It seems as though when I ask this question I generally get biased answers (term agents have their pitches, whole agents have their pitches).

Question 2: As a general rule of thumb, wouldn't it be better service to approach each new client with the mindset that they might qualify for fully underwritten insurance and to make them fully aware that even though they may have some health problems, certain carriers could qualify them with a fully underwritten policy, leading to a better price and coverage? It seems as though to me that if you only focus on simplified coverage you would be tempted to not mention that other fully underwritten policies are available. Not only that, but I just read that sometimes people who are disqualified for simplified policies are then sometimes placed into fully underwritten policies (I assume because then they can get more accurate information about what is going on with the individual's health). So again, why not just start with the fully underwritten possibility in mind?

Question 3: For the average customer, I could see them wanting the price of term insurance but the peace of mind that permanent policies provide. In my research I came across guaranteed universal policies. They are products that can be set to certain ages (85, 90, 95, 100, 121), which could essentially function like a permanent policy, but without the cash value (I believe the cash value is available but you just don't fund it, keeping it at zero, so all your premium can go towards coverage). Is there any difference in the underwriting for these policies and would it be possible to get a simplified issue guaranteed universal policy?

Question 4: If there are any significant differences among underwritings of simplified issue term life, simplified issue whole life, and guaranteed universal (simplified or not), how would I know as an agent where to make the cutoff decisions for putting them in one or the other?

Thanks!

 

[DHK]

Question 1: I'm getting conflicting messages about the underwriting standards for simplified issue term life and simplified issue whole life. The claim from my manager is that simplified issue term life has stricter underwriting so it is easier to place someone in simplified issue whole life. I've heard from other sources that the underwriting for term and whole is generally the same. Does anyone on here actually have the qualifications to clearly claim if underwriting for simplified term versus simplified whole is a real concern(not guaranteed issue, I understand what is happening with guaranteed issue)? It seems as though when I ask this question I generally get biased answers (term agents have their pitches, whole agents have their pitches).

Let's start there: Yes, generally speaking, simplified issue term will be more strict in underwriting than simplified issue WL. Why? Face amounts.

Take Assurity for example: Assurity has a Simplified Issue Term policy up to $350,000. (However, their fully underwritten term for $350,001 is cheaper because it is fully underwritten with an exam, so there's a better known risk.) Also for term life, almost all carriers will pull a DMV report. Not necessarily so for permanent life.

However, also with Assurity, you can get up to $149,999 of WL without a medical exam. Why? Because the premium is larger for a smaller death benefit.

Is it a real concern? Only to the agent.


I've alluded to my opinion on Question #2.

Question #3: Check with each company's financial and health underwriting guides.

 

[DHK]

Question 4: If there are any significant differences among underwritings of simplified issue term life, simplified issue whole life, and guaranteed universal (simplified or not), how would I know as an agent where to make the cutoff decisions for putting them in one or the other?

Depends on the need, age, and health of the prospect you are helping. Sometimes this is more 'art' than 'science', so you get an idea of where the sale is. The sale isn't just what they want, but what they can actually get and qualify for.

 

[New Ins Dude]

Thanks! Now let's assume we're going down the route of comparing small, equal face amounts. If I understand correctly, if a customer wanted only $15,000 of coverage, the only difference in the underwriting would be a DMV report?

 

[New Ins Dude]

And to reply to your reply regarding question 4: So being a new agent who is only trying to sell simplified issue whole life products, I would be missing out on many possibilities of other policies because I am unfamiliar with the art.

 

[DHK]

For only $15,000 of coverage, I doubt you'd find a term policy for that low - aside from group coverage through an employer.

Term life usually starts around $100,000 at a minimum.

But remember: the company gets more premium for the death benefit with whole life (or other permanent products), so there's more premium to help offset the risk.

Personal example: My father has impaired health. Not uninsurable, but not standard health either. Companies will NOT issue term insurance on him, but they WILL offer permanent life. Why? Because the amount at risk goes down the longer you hold the policy.

Amount at Risk

 

[DHK]

And to reply to your reply regarding question 4: So being a new agent who is only trying to sell simplified issue whole life products, I would be missing out on many possibilities of other policies because I am unfamiliar with the art.

People will buy what you recommend. The question is - are you serving them to the best of your ability, expertise, and for their best interest?

I'd recommend starting here. I am biased, but it's pretty good:
https://insurance-forums.com/community/threads/guidance-for-new-life-agents.29999/

 

[New Ins Dude]

Exactly, the customer may be unaware of all their options and will buy from me because they already trust me. But I would say that until I have a good grasp of the market I'll be selling to, I could be missing a lot of things, because I hadn't used the potential of my ability (actually study in depth what is going on), expertise (I have almost no expertise right now), and I can't fully assess their best interest because I don't really know how yet. Thanks for helping!

 

[DHK]

The money sounded good so I've been looking into it, got my license, and have been contracted to sell through several carriers.

Here's what you do:
1) You start with ONE company that has a decent portfolio of products. Study them - including the financial and medical underwriting guides.
2) As you study other products with other companies, you compare them to the first company. They may be better, worse, or just have a couple of niche products to keep in mind. You may have a new benchmark company, or you dismiss the company and their products entirely, or you like a couple of products.
3) Rinse and repeat.
4) For the products you don't necessarily 'like'... figure out the proper market and use for those products. Maybe you just don't see how they can work for a client yet? Maybe there's a special provision or clause in the product that makes it more unique than anything else? You won't know until you figure out who the product is best for and why.

There's no such thing as a bad product (usually). Only an improperly sold or improperly placed product given the client's circumstances.

 

[New Ins Dude]

That last sentence is what I'm most concerned about.... That I might be regularly misleading people to believe they have bought the proper product for their needs when I don't really have the knowledge to assess that. For example, selling a simplified issue whole life policy to someone who only really needed minimal fully underwritten term insurance because: A. I'm not a financial planner. B. My company only sells simplified whole and some guaranteed whole.