We’ve all run into this before: a sweet, older lady that has one or more policies that are over five years old. She really wants more insurance, but just can’t afford to pay any more per month. Now maybe she purchased a Colonial Penn Graded policy or a Lincoln Heritage policy. And while they were very overpriced when she got them, now you don’t have anything that can beat the price.
Maybe you even have access to a Price Buster carrier, but even with those carriers, you can’t beat the price. She can’t afford to add on anymore, so you tell her she has the best deal she can qualify for, shake her hand and move on to your next appointment.
WAIT! STOP! HAVE YOU SEEN THE POLICY YET??
I have left so much business on the table because I didn’t check their policy or call their current carrier to see what coverage they have.
1. Get all the details
First off, people rarely know exactly how much or what kind of insurance they actually have. Until you have seen the policy, it’s all just guessing. You MUST get their current policy IN EVERY HOUSE! (If they can’t find it, call into the company and ask for a few things: Policy number, Face Amount, Type of Policy, Premium, Current Cash Value, the REDUCED PAID UP option and the Extended Term Option.) If they have had their policies or over two years, they have several surrender options.
Whenever you are looking at the table of values, you will see four to five columns. The face amount, sometimes the premium, the cash value, the PAID-UP or the REDUCED PAID-UP option, and the extended term option.
Most of us are familiar with how cash values work. Usually, after the second year, Cash Value starts to accumulate. Clients can take out loans against the Cash Value, which they will ultimately have to pay back or the loan amount will be deducted from their face amount at death, or they can cancel/cash surrender a policy to get all the Cash Value. In many situations, this is enough to earn you a replacement sale.
Here’s an illustration: Say the prospect has a three-year-old Physician’s Mutual policy with $500 in Cash Value. You can beat their current price with a competitive carrier, so you capture all their premium and pitch it like this:
“Right now you are paying $50/mo for $9000 in coverage. We can actually upgrade your policy to $10,000 for the same $50 a month and Physician’s Mutual will actually mail you a check for $500!! And we handle everything. We are a full-service shop. You won’t have to do a thing. Now, who do you want to leave the $10,000 to when you pass?”
***Remember this: everyone wants to get something for nothing. And many of our clients have taken this philosophy to heart. I have even said that to prospects, and they agree with me. You will sell a lot more replacements if you understand that this is a central mindset to the Final Expense clientele.***
So that’s the easy replacement, but sometimes you can’t beat the price. This is where you can use the Reduced Paid Up (RPU) to still help them get something for nothing.
2. What is Reduced Paid Up?
Reduced Paid Up is exactly what it sounds like: a paid-up option. After two years, the client can choose to convert their policy to the paid-up option, stop making premium payments and will end up with a Paid Up policy, albeit a smaller face amount. Usually, the Reduced Paid Up option is equal to up to two times the Cash Value forfeiture option. So, if they have $1000 in Cash Value, the Reduced Paid Up option may be somewhere $1500-$2000.
Say you run into a 10-year-old Western and Southern policy. The prospect is paying $50/mo for $5000 in coverage, and they have $2000 in Cash Value, and a Reduced Paid Up option of $3500. You run the numbers and, based on their current age, and you can only get them $3000 for $50/mo. Game over right? NO WAY!
If the client were to convert their policy to a Reduced Paid Up, they would have a $3500 policy, and now they have $50/month to spend. You add on a brand new $3000 policy for $50/month, and now, FOR THE EXACT SAME PREMIUM, they will have $6500 in insurance. They just got something for nothing!!!
3. How do you pitch it?
This is all well and good, but this is kind of confusing, even to me, at times. So it’s really going to confuse your prospects if you try to explain the ins and outs before you close with them. So you have a couple of options. You can just pitch getting them more insurance for free, or you can use “Either/Or” Close. Maybe you could get them $5000 in coverage, but you would have to increase their premium to $70 a month. Remember they have $2000 in Cash Value in their policy. So you pitch it like this:
“Great news! Because you’ve been paying on this policy for so long, you have some great options. (Make sure to always write this down so you can show them while you explain it to them). You can EITHER keep your death benefit at $5000 for $70/mo, and you will get a check for $2000 in the mail (smile) OR you can keep your payment the same at $50/mo and increase your coverage to $6500 for free!! Which would you prefer to do, get the $2000 cash for a few bucks more a month or keep your payment the same and increase your coverage for free?
NOW SHUT UP! Whoever speaks first LOSES!”
If you would like to earn more selling Final Expense, visit www.learningfe.com/learnmore
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 higher 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.
Visit https://learningfe.com/what-we-offer/ for more details.