Why Do So Many Agents Want to Sell Final Expense?

[dgoldenz]

There are several factors to consider when selling FE to seniors. First of all, most don't want or need the 50K you would have to give them when selling a universal. The price would actually be more on 50K than on say a 15K FE product. Another thing to remember about a UL is that it probably will lapse if you don't add on the guarantee no lapse rider which makes it even more expensive. Health is also a factor. FE is simplified issue with very few health questions and some have graded death right on the same app if they can't qualify for anything else. UL remember is a policy that is designed as a savings vehicle, not for pure death/final expenses. The UL was designed by insurance companies to combat the "Buy Term and Invest the Difference" philosophy. It was not designed with the senior in mind. As for commissions...selling a senior the minimum required amount on a UL would pay about the same as FE products anyway, so it's not really a commission thing.

UL is far from a savings vehicle....a 65 year old male at standard rates can get $50k no-lapse UL from West Coast Life for $1379/year, or $1139/year at preferred rates with Genworth. What would it cost for a $15k or $25k FE policy on a male the same age? I'm trying to get an apples-to-apples comparison.

"Most don't want or need the $50k you give them" --> If someone offered them $50k or $15k for the same price, which would they be more likely to take?

 

[know patience]

Most of the good points have been made already in previous posts. My personal experience is that most seniors either have insurance policies in place or can't afford to purchase fully underwritten insurance (usually limited budgets or health problems make the costs prohibitive). The seniors market are a prime example of adverse selection.

You would be surprised how many can't afford a simple FE policy because their budgets have been stretched to the limit by the costs of medication alone. This situation is likely going to continue to deteriorate before we see any significant improvements. Here's an extra tip: for the seniors who don't want to burden their children but can't afford the premiums for FE coverage, I implore them to have the children pick up the tab on the insurance or to have the children talk to me directly. It seems obvious but I was surprised at how effective that quick question would help overcome the cost objective.

Bottom line: if you're doing what's best for you're clients, you should learn to use the right tools for the job.

 

[sman]

As for commissions...selling a senior the minimum required amount on a UL would pay about the same as FE products anyway, so it's not really a commission thing.

Todd,

I think this is part of the OP's point. The UL would require a paramed, blood & urine and underwriting. All of which require time and energy of the agent. The FE product doesn't. So if you could offer your client $50k of coverage for the same cost as $15k, but one would require 30-60 days to issue and require an exam and your commissions are the same, which one does the average agent offer?

Unfortunately, many will go with the path of least resistance and offer the one that gets him/her paid the quickest.

Any experienced agent has been around long enough to know which conditions would be an issue in underwriting and which ones would get through. If an agent is not even giving the client the option, they are only serving themselves.

 

[bluemarlin08]

Another thing to remember about a UL is that it probably will lapse if you don't add on the guarantee no lapse rider

That is not necessarily true if the policy is designed properly. I have NEVER had a UL policy lapse. Perhaps I am missing a great value for some folks, look forward to someone posting some rates for the above comparison. What type of health conditions will be covered at "std rates"? Do these policies come in different rate categories? Do these policies take uninsurables that might be turned down by typical UW?

 

[SportsNut]

Todd,

I think this is part of the OP's point. The UL would require a paramed, blood & urine and underwriting. All of which require time and energy of the agent. The FE product doesn't. So if you could offer your client $50k of coverage for the same cost as $15k, but one would require 30-60 days to issue and require an exam and your commissions are the same, which one does the average agent offer?

Unfortunately, many will go with the path of least resistance and offer the one that gets him/her paid the quickest.

Any experienced agent has been around long enough to know which conditions would be an issue in underwriting and which ones would get through. If an agent is not even giving the client the option, they are only serving themselves.

The final expense biz isn't catering to those folks that either have money or health. As a general rule they have neither. Many table ratings would be involved in the avg FE client obtaining an u/w policy, if at all. The FE products are specifically built for simple issue which is what is needed in the majority of cases.

The financial u/w might be as bad as the medical requirements. Guidelines for ages 70-85 and over may not even allow the typical FE expense client to qualify for 50K, based on 3 to 5 times income.

I would say give it a try and see how it works out, before you criticize others that are out offeing FE. It is a niche product and if you attempted to take the methods and practices that you use on under 65 life for those that have financial means, you may well get an education... not necessarily one you wanted. It is a different mkt, period.

 

[dgoldenz]

The final expense biz isn't catering to those folks that either have money or health. As a general rule they have neither. Many table ratings would be involved in the avg FE client obtaining an u/w policy, if at all. The FE products are specifically built for simple issue which is what is needed in the majority of cases.

The financial u/w might be as bad as the medical requirements. Guidelines for ages 70-85 and over may not even allow the typical FE expense client to qualify for 50K, based on 3 to 5 times income.

I would say give it a try and see how it works out, before you criticize others that are out offeing FE. It is a niche product and if you attempted to take the methods and practices that you use on under 65 life for those that have financial means, you may well get an education... not necessarily one you wanted. It is a different mkt, period.

Most carriers will write up to 20x income, so $50k shouldn't even be an issue for financial requirements. I understand that someone in very bad health may be suited for an FE product, but most of the people I see asking questions mention nothing of the sort. They want to know how they can cold call and sell the product with the least possible amount of work.

I would bet that the majority of people who buy FE would qualify for an underwritten policy with likely standard or better rates and simply bought the FE because it was the only option presented to them. Personally, I haven't seen many agents that sell FE who are also contracted with the larger carriers for underwritten policies. This tells me that rather than shopping a case and finding the best fit for the client, the agent just wants to cram an FE policy from company XYZ down the client's throat.

If you were to tell every single person who bought an FE policy that if they took an exam, they may be able to secure 2x the face amount or more, or spend half the amount for the same coverage, they would be all over it.
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Trying to edit prior post but it seems to not let me...in response to the question about no-lapse UL, every major carrier that I know of offers some type of no-lapse UL product (no rider needed) with death benefits fully guaranteed to age 121. There are many health conditions which can qualify for standard or better rates and unless the person has an abnormal height/weight profile or a heart attack/cancer/diabetes/other potentially deadly health condition, qualifying for standard is not that tough.

 

[SportsNut]

Most carriers will write up to 20x income, so $50k shouldn't even be an issue for financial requirements. I understand that someone in very bad health may be suited for an FE product, but most of the people I see asking questions mention nothing of the sort. They want to know how they can cold call and sell the product with the least possible amount of work.

I would bet that the majority of people who buy FE would qualify for an underwritten policy with likely standard or better rates and simply bought the FE because it was the only option presented to them. Personally, I haven't seen many agents that sell FE who are also contracted with the larger carriers for underwritten policies. This tells me that rather than shopping a case and finding the best fit for the client, the agent just wants to cram an FE policy from company XYZ down the client's throat.

If you were to tell every single person who bought an FE policy that if they took an exam, they may be able to secure 2x the face amount or more, or spend half the amount for the same coverage, they would be all over it.
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Trying to edit prior post but it seems to not let me...in response to the question about no-lapse UL, every major carrier that I know of offers some type of no-lapse UL product (no rider needed) with death benefits fully guaranteed to age 121. There are many health conditions which can qualify for standard or better rates and unless the person has an abnormal height/weight profile or a heart attack/cancer/diabetes/other potentially deadly health condition, qualifying for standard is not that tough.

Maybe you should check with your life carriers about writing 20x income on a 71-85 yr old, see what they tell you... I am looking at AIG's guide and sure enough, for age 41-50 it is 20x; age 66-70 is 5x; age 71 and over is indiv consideration... So as I said, you might be looking at 2x income in the 71-80 range unless they are high net worth folks...

The FE mkt is way different than what you portray. I can tell that you haven't been to any of the typical FE appt. I would suggest that you do some, then get back to me on the fully u/w life. Most of the folks want NO hassle and do NOT want to be turned down... major criteria in their minds... and most of them wouldn't be acceptable risk for std issue as you mentioned.

But, beings that I am a betting man, I would gladly take your bet, if you wish to lose the money. Nowhere near half of those folks would qualify for std or better rates on fully u/w policy. Just isn't going to happen that way.

 

[dgoldenz]

Maybe you should check with your life carriers about writing 20x income on a 71-85 yr old, see what they tell you... I am looking at AIG's guide and sure enough, for age 41-50 it is 20x; age 66-70 is 5x; age 71 and over is indiv consideration... So as I said, you might be looking at 2x income in the 71-80 range unless they are high net worth folks...

The FE mkt is way different than what you portray. I can tell that you haven't been to any of the typical FE appt. I would suggest that you do some, then get back to me on the fully u/w life. Most of the folks want NO hassle and do NOT want to be turned down... major criteria in their minds... and most of them wouldn't be acceptable risk for std issue as you mentioned.

But, beings that I am a betting man, I would gladly take your bet, if you wish to lose the money. Nowhere near half of those folks would qualify for std or better rates on fully u/w policy. Just isn't going to happen that way.

I don't know about AIG these days but we have never had any issues with financial requirements on policies $100k or less on older individuals. I understand there is a market for FE - that is not my question. My question is why so many agents want to sell FE no matter who will buy it? Many people are saying they will cold call stay-at-home moms and sell them FE "just in case" or walk door to door and hope for the best - surely, the insureds here are far from uninsurable. I would be VERY interested to find out what risk class most people who buy FE would fall under with an underwritten policy.

 

[SportsNut]

I don't know about AIG these days but we have never had any issues with financial requirements on policies $100k or less on older individuals. I understand there is a market for FE - that is not my question. My question is why so many agents want to sell FE no matter who will buy it? Many people are saying they will cold call stay-at-home moms and sell them FE "just in case" or walk door to door and hope for the best - surely, the insureds here are far from uninsurable. I would be VERY interested to find out what risk class most people who buy FE would fall under with an underwritten policy.

The difference of what you are referring to of an older person buying 100K or less... are clients with means... some net worth and some income, retirement or otherwise.

The avg FE client is either below, at... or just above the poverty level... in most cases. These are folks who have less than a few grand to their names, on avg... and no way to pay for a funeral. They aren't worried about leaving a large sum to anyone, they are worried about being a burden to their kids, since they have done no planning, and mostly it is for lack of funds... they had nothing to plan with. And most of them are NOT in good health, and wouldn't qualify for fully u/wpolicy unless it was a table 6 or 8... which might be higher than the FE rates, who knows.

Most agents working FE are doing so because it is daytime appts, leads are available, easy appts, relatively straight forward sale and presentation, product that fits the need of the mkt simplified issue... or GI, and advanced comm.

Avg prem is about 35 mo, or 420 AV. which might provide 5K face depending on age, gender, s / ns, etc.

I don;t see what the issue is here... you think that the avg FE client is something that they are not, really. You are insinuating that the agents are out there selling FE to a housewife...? Not happening, and if so not often. I would suggest that you go out on some FE appts... Leads of folks that have returned a reply card because they have a concern... and a fear that they cannot buy ins... The good FE agent calms their fears and fills their need. Where's the beef, as Wendy's used to say.

Suggest you take one of your no-lapse UL's, and figure a M, age 83 smoker, rated at table 8 and tell me what the prem is for 5 or 10K of coverage. That will have the rating software a-cooking...

 

[bluemarlin08]

What is the premium for the 83 year old smoker for 5 or 10k of coverage?