Replacing modified life insurance

Increase your Final Expense Sales by 25% by Learning How to Replacing Modified Coverage

In Getting Started, Presentation, Prospect Mindset, Replacements by Admin

In the Final Expense business you will run into folks, on a weekly basis, that have purchased policies with Modified coverage.  Modified, Graded and Return of Premium are all terms that these types of policies go by.  When I speak of a Modified policy, I am talking about a policy that will only pay the beneficiary the Premiums paid in plus interest during the first 24-36 months.  You will see lots of these in the field.  United/Mutual of Omaha, Met Life and Colonial Penn are the most popular around me, but you will see these plus an assortment of other carriers that offer and sell Modified coverage to clients.

While some clients may be forced to take Modified or Graded coverage based on their health, 90% of clients will not.  Yet many of the mail in and TV companies only offer 2 year Return of Premium Modified coverage.  They don’t care if the client is laid up in a hospital bed or doing jumping jacks in the living room, they are giving them Modified coverage.  Sometimes an agent will have to sell the prospect Modified coverage because they don’t have the depth of carriers that an Independent Agent would have access to.  Whatever the reason, these type of policies are layups, when it comes to replacement.

Whenever you find out a client has current coverage, don’t jump to get all that information off the start.  You haven’t built enough trust and credibility yet.  Continue with your presentation like normal.  Find out why they sent in the card and see what their reason for having you out there was.  Maybe they just wanted to add on to what they currently have.  I don’t know how many times I have entered a house and found 3 or more policies.  A cardinal rule is to always Capture all the Premium in the house.  If they are paying $100 a month in premium, I am going to walk out of the house with AT LEAST $100 in premium.  The exception being if the client feels like they are paying too much and just cannot afford what they’re currently paying a month.

I have walked into many houses where the client still has a Mutual of Omaha policy in the first 2 years and was recently sold another level coverage policy by another agent.  Amateurs!  Always find out about every policy they have!  So let’s look at a real life example.  This is assuming you have done your due diligence during your presentation and they have shown you their policy or you’ve called in to the carrier to get the values.

So you find out they have a Colonial Penn policy that they have been paying on for 12 months.  The premium is $100 a month.  They believe they have a $15,000 policy.  Now, of course, this policy will be $15,000 after the 24 month, BUT IT IS NOT THAT MUCH RIGHT NOW.  I am going to check on their health and make sure I can get them something 1st day coverage and then I am going to run some numbers.  Now we know that Colonial Penn is a 2 year Return of Premium + 7%, so if they died today it would pay out ($100 x 12) x 1.07 = $1284.  So now I’m going to write all of this down and show it to them:

“If you were to die today, Colonial Penn would only give your kids what you’ve paid in plus 7% interest which would be $1284.”  I would then explain why and show this to them in their policy or when I was on the phone with the carrier, I would have the phone on speaker and have the company rep explain it for me.

“Now Colonial Penn is a good company and these types of programs are sometimes needed, but only for people who are really sick, you know people that have cancer or just had a heart attack…something major.  Now you don’t have cancer or anything do you?” (This creates a Wedge.  They don’t want to be associated with a company for people with Cancer!)  “No?  Well then you actually qualify for something a lot better.”

“Now Mrs. Jones, the good news is that we are a full service shop.  We handle everything for you.  Currently you are paying $100/mo and if you died today, your kids would only get $1284.  That’s not enough to bury you, is it?”  “Well we can take care of you…you won’t have to do a thing.  For the same $100/mo, you will get $20,000 in first day coverage.”  (Make sure you have this written down on a piece of paper so they can see.)


Now     $100/mo         $1284

New     $100/mo         $20,000


“Now who do you want to leave the $20,000 when you pass?”


It’s that easy!


Now what happens if you run into someone who has $10,000 will Mutual of Omaha paying $50 a month, which is a very low premium, but they also smoke and have COPD?  Mutual doesn’t charge them extra for being a smoker or for their health.  They give everyone the same rate based on their sex and age.

Now all you can offer them is Liberty Bankers/Transamerica Standard rates or Americo UP2.  You will probably only be able to get them around half of the face amount for the same premium.  But remember, we SELL GUARANTEES!  Mutual offers ROP + 10%, so if they have had it a year its ($50 x 12) x 1.10 = $660 in total coverage today.

“Now Mrs. Jones if you were to die today, your kids would only get $660, but for the same exact payment of $50, we can get you $5000 in coverage, that starts day 1 with no waiting period!”

It’s the same close.  Now if they live another 12 months they would be better off, but life is but a vapor and none of knows when we will pass away.  The smart move is to take the 1st day level coverage.  Now I don’t necessarily explain all that to the client, because our clients all think they will live forever.  That is why if I am quoting them when they have no coverage; I am still going to show them the standard rates over a ROP product every day of the week.  Level coverage trumps all!

Now sometimes they will have a modified Lincoln Heritage or Pioneer American policy because those carriers are strict when it comes to an ailment the client has.  Other carriers will not only offer them 1st day coverage, but at significantly lower premiums OR (because we always want to capture all the premium) more face amount for the same premium.

Even if you run into a policy that was sold at level coverage, if it is within the first two years, you need to check it.  Did they actually qualify for the product?  Did the agent list them incorrectly as non-smokers?  Are they taking a medication that would be a knockout for that company?  Usually at the back of the policy will include a copy of the application, including the health questions.  Make sure and check those.  Maybe it’s been 3 years since the client had cancer, but this policy was written 1 year ago and the company they have has a 3 year look back on cancer.  If the client were to die today, the company WOULD NOT pay out!

Just this week, I was trying to replace a competitive policy with one of our price busters.  We got all the way through the phone interview and find out she had been prescribed Nitrostat since 2010.  Declined!

She has refilled the script every year since then, but never needed to take it.  Most carriers do not care if they have taken that particular medication or not.  That’s how it was with the company she had had for the last 9 months.  I was able to not only capture all the premium and put her with a carrier that would take her level, but I got her original policy rescinded and all the premiums refunded back to her.  (Now many times this will not work if a company has a phone interview, as the carrier will say that the client was “in on it.”  In this case, there was a phone interview, but they missed the Nitro when they pulled her Rx and the agent didn’t do their due diligence to find out she had been prescribed it.)

As has been discussed, replacing Modified products with level 1st day products should always be a layup for the independent agent.  Just make sure you stick to the presentation and explain the situation correctly, always assume the sale and take control and you will close these situations 99% of the time!

Josh Jones is an expert in the Final Expense market. He and his business partner, Brandon Smotherman, who is a $400,000/year Final Expense Producer, have taken their years of successful experience in the Final Expense and Medicare markets and are now teaching agents how to replicate their proven system. So whether you are thinking about entering the Final Expense market or you are a veteran agent that desires a greater income or you just want to add some Final Expense products to cross sell, Josh and Brandon have the knowledge and resources to help you grow your business.

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