Genworth Life and Annuity, formerly First Colony, issued a statement today saying that as of Steptember 2, 2014 they will be raising rates on their Genguard No Lapse universal life conversion product by 50% to 60%. This is really no big deal unless you happen to own a policy with Genworth or First Colony and it’s a Colony Term life insuranceproduct. A few examples they used in their flyer to agents
1. Male Age 55 Preferred Best Non Smoker for $1,000,000
Existing Product (Guaranteed To Age 121) $12,755
New Product (Guaranteed To Age 121) $29,481
New Product (Projected (not guaranteed)To Age 121) $28,895
2. Male Age 65 Standard Non Smoker for $250,000
Existing Product (Guaranteed To Age 90)$6,341
New Product (Guaranteed To Age 90) $14,222
New Product(Projected To Age 90) $13,694
3. Female Age 60 Standard Non Smoker for $500,000
Existing Product (Guaranteed To Age 121) $9,367
New Product (Guaranteed To Age 121) $15,839
New Product(Projected To Age 121) $15,580
Far from slamming Genworth for this move I commend them for the fair warning they’ve given, but I fear that millions of Genworth customers will never see this opportunity because their agents are no longer in the business or their agents don’t pay attention to trends and announcements. That’s what makes the fact that an agent can write the conversion for their client even if they weren’t the writing agent on the original policy. Millions will never know about the lost opportunity because financial publications don’t treat the changes in life insurance as news worthy even when they could potentially cost individuals hundreds of thousands over the life of their insurance policies.
I’ve tried everything over the years to make the changes in term life insurance conversion options the hot topic that it should be, but apparently doing back flips on my key board and screaming at the top of my blog lungs just makes me another blogger. It’s frustrating to me as millions upon millions lose the opportunity for a fair and cost effective solution to their permanent insurance needs, but companies are making these changes because they have decided certain products aren’t as profitable as they would like. The last thing a company, even a company as outstanding as Genworth, want to do is make a big splashy announcement to their policy holders that they have just a short time left to buy a product they would prefer slipped silently into the night. The goal, the high road for these companies, is to get the word out just in time for a few customers to be able to take advantage of it, but not enough that they create a last minute large block of business with the disappearing product.
If you take example number 1 above it kind of gives you a sense of the enormity of what we’re talking about. The person is 55 now and if he lives to an average 80 years old, 25 years, and does the conversion before September 2, he’ll spend $318, 875 and his family will receive $1 million. If he thinks about until after September 2 it will probably not get done because he would then be spending $737,025 over the same period. If he lived to 90 he would have paid in more than his own death benefit.
I get it. I understand that this looks and smells like high pressure sales, a practice that I personally find disgusting. I’m not suggesting that everyone go out and pull the trigger on this because it isn’t for everyone, but consider a few truths.
1. You can convert as little as $50,000 which is really more realistic for most people. It leaves a little something in force forever after the term insurance is gone.For client #1 that might cost $1500 or so a year.
2. You may not know yet if you will even need permanent insurance, but it’s a very good bet that at some point you will like to have an inexpensive final expense policy. This is a great opportunity for that.
3. If you believe you will need a larger amount of permanent life insurance at some point for estate taxes or business purposes, do the math. Buying a little earlier than planned is going to save you money because you’re not getting younger and the price increase is going to happen.
4. I can’t believe these words are even going to be in my post, but if down the road you want to sell your policy to a life settlement company, the chances of it being purchased for a good price are much higher if the converted rate is lower. While that is true, I only added it in for the key word exposure. I really don’t recommend life settlements.
5. This is one of those grown up things that ought to get a few minutes of your time. Ponder your family future and if you believe you will need some amount of permanent life insurance, convert it now.
Bottom line. Hardly anyone will read this, but if I reach a few people and it makes a difference in their life, job well done. If you have questions about if you are eligible for this conversion, would like quotes or just want more information, call or email me directly. Remember the criteria. Genworth Life and Annuity or First Colony “Colony Term” products. My name is Ed Hinerman. Let’s talk.