On Your Own Terms | February 2002 Short Takes -- Web Exclusive

Short Takes — Web Exclusive: On Your Own Terms

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By William Barnes

All insurance is term.

In the last few years, I've had clients and prospects ask me to review the difference between term and permanent insurance. I use a legal-sized pad on which I illustrate how all insurance is term. The first kind of term is where both the cost and coverage are level; we call this term-for-life (whole life). The second type is where the cost is level but the coverage decreases; we call this decreasing term. The third is where the cost increases each year, but the coverage stays level; we call this annual renewable term.

I try to keep a nice stock of term insurance for conversion on an annual basis.

When you consider life insurance, you must determine the reason for purchasing it. Do you want it until you die or for a temporary period? Do you want it for a longer period or do you want it to cease if it becomes too expensive to continue? My clients usually want it until they die, so that's what I try to sell them, because all insurance is either going to cover them for a short period of time, cover them until death, or cover them until they can't afford it any longer. I let them make their own decisions on what they would like to purchase.

If a person takes a decreasing term on a mortgage, I try to convert it on an annual basis. The same is true with an annual renewable term. I notify them on the policy's anniversary day each year regarding the conversion. This is done without a conversion letter. You would be surprised how many of my clients convert their insurance. I try to keep a nice stock of term insurance for conversion on an annual basis.

This is an excerpt from the classic book, Advisor Today's 300 Best Sales Ideas.

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