Most business models are built around the premise of keeping your current client base and building on it. Given the premise it’s understandable that a business would be upset about losing a customer.
In life insurance that client relationship is certainly true when it comes to your agent. Agencies are built on earning trust, serving clients and from that comes a natural tendency for clients to recommend us, so we grow.
With insurance companies all of the same holds true, except for this one kind of gray little area where a company has been making money from you for some time, and have stood ready to provide their end of the contract, a death benefit, but you choose to replace their policy with another or cancel it because you no longer need it. While they will do what they can to keep your business, let’s be real.
If the company has taken in, say, $5000 in premiums over the years on a $500,000 policy and you decide to cancel that policy, the company has really kind of hit the sweet spot with your business. Enough money that they have made a profit and they can bank it because there won’t be any death benefit to pay. And before you declare them slum lords of some sort because they would take their money and run, remember that quite often very little is paid in and a lot is paid out.
A few recent deaths in my client base really point this out. One client had paid in just over $800, one annual premium, and his family received $100,000. Another had paid in almost $3000 over about a year and a half and the family received $1,000,000. Is it OK with the company if you find a better deal and go elsewhere? Sure it is. Do they still value you if you continue to be their customer? Sure they do.
Bottom line. The best of all worlds comes with an independent agent. A good agent will find you the best possible deal at the time you meet, but also present you with any opportunities to improve on the value of your coverage as time goes by. Their allegiance is with you, not any particular insurance company.
My 20 years of experience give me the knowledge and leverage to find reasonably-priced life insurance for people who have been declined or are paying more than they need to.
The only products that I know of that are lapse supported (i.e. the insurance company wants you to lapse at some point) are ROP term products and guaranteed level premium permanent products life products (guaranteed whole life, no lapse UL).
Since you sell mostly term products the insurance company usually has very high annually increasing term rates after the level period such that they would mostly prefer you stick around as long as possible. Also on regular UL products the COIs go up every year to pay for the annual mortality cost so they’d prefer you stick around there as well.
Only on level premium permanent deals do you “over pay” in the early years and “under pay” in the late years such that the insurance company would prefer you not stick around.
Michael,
Greetings. No great surprise that I disagree. The two instances where you believe the companies might want you to stick around happen to be where they are in the habit of running people off through giant premium increases, some planned and some not. Term insurance has a huge jump at the end of the guarantee period and that is known up front. Traditional or “regular” UL’s as you called them are a product that leans heavily on assumptions and is prone to surprise increases that are historically not small or gradual.
Not that the company wouldn’t love for you to pay those increases, but anyone that isn’t terminally ill isn’t likely to write off on that kind of insanity.