We all know that residuals are the lifeblood of the life insurance industry. Agents work incredibly hard to sign-on clients, knowing that if they play their cards right and build a nice book of business over time, residuals will help them grow their wealth.
However, when times are tough, like now, clients are looking at their bills and wondering if they should continue to pay their life insurance premiums. Maybe they have lost income, or their spouse or a family member has had a setback. Everyone is dealing with the economic stresses of this pandemic, and many are scrutinizing their expenses and assessing what can be cut back. They look at their life insurance policy and wonder: Do I still need this? For the agent who sold them that policy, this is a nightmare scenario. You don’t want to see the client drop it for many reasons. First, the agent will no longer earn residuals, but they also become disconnected from the client, potentially losing a relationship – a much bigger downside than lost residual income.
How can an advisor combat this issue? Today is a great time for agents, advisors and insurance brokers to reach out to their clients and let them know that if they are considering dropping a policy that they need to have it appraised first. Agents need to instruct their clients on how to get a life insurance policy appraisal because otherwise, the client could be making a huge mistake.
For years, we prospected from our current client list because we wanted to move our clients into new insurance products or move them from their term policies into whole or universal life. Today, agents could be losing that option, and it ought to be unnerving. It’s critical at this juncture to have a strategy to work against this. A policy appraisal gives you a reason to reach out and touch your clients, check-in on them and see how things are going. If they are showing any signs of dropping or lapsing their coverage, then it is the perfect time for you to offer them a policy appraisal. Knowing the cash surrender value of life insurance policies along with the appraisal value puts the agent and client in an educated position.
With an appraisal in hand, and agent now has options. First, you might be able to help them sell a policy and get some money that they can use to bridge the economic gap that they’re worried about right now. The opportunity is appropriate for life settlements, and insurance agents are the perfect conduit. In this situation, the agent is now the hero. Second, if you can sell their policy, you may be able to move them into another policy that’s a better fit. Economically, this can be a boon. You may earn a commission on the sale of the policy, and at the same time earn a chance to help them with a new policy. If you can keep the old policy in force, then you also have a chance to keep the residual. So our story comes full circle.
Agents advisors and brokers need to be speaking with their clients sooner than later about their options. If it looks like a client might lapse a policy, then a policy appraisal is the perfect next step. Explaining to a client that they may be leaving money on the table is a great way to build trust and keep a relationship. If a client decides to lapse a policy without an appraisal, not only is the client worse off, but a relationship (and residuals) will be lost forever.