Related Topics:
Product descriptions | Disability income insurance | Long term care insurance | Critical illness insurance | Annuities | Segregated funds

As far as selling life insurance is concerned, the choice is simple: term or permanent. Term insurance, five and ten-year term, in particular, often do not require the involvement of a producer and the commissions reflect this. That is why the product can now be bought over the Internet, in some drug stores and through certain Automatic Banking Machines. The purchase of a Term to 100 policy, especially for larger amounts, usually does involve a producer. The simplicity of the product coupled with the fact that the policyholder can not outlive the policy as long as premiums are paid, account for its appeal. Term to 100 requires premiums to be paid to age 100. Many prefer a shorter payment period and that is where whole life and universal life come in.

Whole Life
As pointed out in "How life insurance is sold", whole life is difficult to explain — especially if you are recommending an "Enhanced Whole Life" policy. Even if you succeed, it's unlikely that the insured will remember your explanation, and unless you plan to service regularly your client may become disenchanted with the coverage. After the policy is sold everything is in the hands of the insurance company. Cash values and other features of the policy are guaranteed and dividends, if the policy is "participating", while not guaranteed, have paid out reasonably close to the way they have generally been projected. To compare whole life policies is virtually impossible since it is a "bundled" product and its separate parts are difficult assess. Still, for clients who are only interested in protection and who have no interest having a say in the way the cash value portion of the policy reserves are managed it remains a good product. Remember that compared to "universal life", for example, there is not much flexibility, so the payments should be well within your client's means for the duration of the premium paying period.
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Universal Life
The popularity of universal life has increased as consumer concerns about "choosing" the right life insurance policy are accelerating. The reasons are obvious; traditional "permanent" life insurance policies do not offer clear-cut disclosure of policy costs such as administration charges, the premiums applicable to the life insurance coverage itself, and the portion of the premium that is invested.

Although each insurance company selling universal life has its own description, there are certain features the policies have in common. It is an insurance contract that combines term insurance with an investment element. The insurance costs, referred to as mortality charges, are clearly defined in the contract. They are either level throughout the contract or increase every year, as the insured gets older. The amount of premium in excess of the mortality and other charges, up to a certain maximum, is invested by the insured in one or a combination of investment options that are offered by the insurance company. Earnings are tax-free if left in the policy while living, and are paid out tax-free at death.

Investment options that link the performance of the "investment" part of the policies to stock or bond indices are popular. Most life companies offer a series of options that allow the policyholder to link all or part of the "investments" to the growth of a Canadian index (such as the TSE 300), an American index (such as the S&P 500) and a world index (such as the Morgan Stanley - world) index. In addition, growth can usually be linked a Short or Mid Term Bond Index and most companies continue to offer a selection of one or more Guaranteed Investment Certificate (GIC) type deposits. Some companies link the performance as well to returns from specific funds designated by the company.

It is important to understand that a universal life policyholder with an equity option does not actually acquire shares in a mutual fund or segregated fund. The cash value will vary based on the comparative performance of the index or in some cases funds to which the money in the "side fund" is linked.

An important feature of all universal life policies is the flexibility of premiums and coverage. Policyholders can adjust the amount of insurance and investment portion on a regular basis. The plan can therefore be adjusted to suit current and future circumstances of the insured. This makes it ideal for Estate Planning, Estate Friendly Investing, Business Continuation and Charitable Giving objectives.

In view of its popularity and the fact that universal life lends itself to being compared, Insurance Desktop has applied considerable resources to providing registered users with a detailed description of the policies offered by over 20 life insurance companies. The differences between various products are immediately apparent and will assist you greatly in the selection of product and the effectiveness of the sales presentation.
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Related Topics:
Product descriptions | Disability income insurance | Long term care insurance | Critical illness insurance | Annuities | Segregated funds