Mark Creighton

Millennials (people aged 18-35) are the largest segment of the U.S. population. Over 75 million Americans, or nearly a quarter of the population, fall into this age group.1 While they share many of the same experiences, like growing up with technology and living through the Great Recession of 2008, they are also different. In fact, millennials are the most diverse adult generation in American history. Forty-four percent are minorities, due in large part to waves of immigration to the States. Some skilled immigrants can receive a h1-b visa from an employer who might see their skillset as beneficial for the company. This happens in quite a few companies in America, immigrants can bring different skills to the table, no matter their age. Just like American Millenials, they are usually hard-working and looking to improve their financial situation by benefiting the company.
 

Stereotypes about millennials abound. Whether any of these assumptions are true is debatable. What’s not deniable, however, is that the majority of millennials are postponing career commitment, marriage and parenthood to the latest ages ever seen in the U.S.2 In many cases, this may be for good reason: 42 percent shoulder student loan debt.3 In fact, the average monthly student loan payment for a borrower in his or her twenties is $351 per month.5 Many of these young people have had difficulty finding jobs, or have part-time or entry-level positions, so paying back these loans and saving money for the future is often difficult. 

Whole life insurance, with its living benefits, could help millennials pay off their student debts and build a financial foundation for the future—but are millennials good prospects for us? You bet. Here’s why:

• They have an estimated $220 billion in collective annual spending power,6
• They’re set to inherit more than $30 trillion from their baby boomer parents,6
• They’re hungry for financial information and, the services we provide,6 and
• They’re a direct link to multiple generations of potential clients.

Different Values/Different Approaches
Millennials came of age at a difficult time and have different core values than previous generations. They may be savvy with technology, but many lack basic financial skills such as budgeting and saving. They also tend to be wary of traditional financial institutions because they lived through the Great Recession and may have experienced first-hand the losses their parents suffered in the job, housing and equities markets. As a result, they are risk averse.6

Given the financial instability they’ve witnessed, millennials want reassurance that they’ll be protected no matter how volatile markets become in the future.6 Whole life insurance, with its guaranteed premium, death benefit and growth of cash value, can be a good fit.

A whole life policy can enable them to automatically accumulate money and grow it at a guaranteed rate of return tax-deferred. It also can provide them access to these funds through loans throughout their lives, for whatever reasons they choose, including paying off their student loans and eventually supplementing their retirement income. This can be especially useful because a recent study by the National Institute on Retirement Security finds that 66.2 percent of working millennials have nothing saved for retirement.8 With whole life insurance, even if they take a loan from their policy, the cash value will continue to grow uninterrupted while they enjoy the benefits of the loan distribution. Add a flexible paid-up additional insurance rider, a waiver of premium, or other riders or options, and you can create policies that can satisfy very specific client needs. 

Although millennials are financially cautious, they are receptive to and want financial information. In a recent survey 44 percent said they were extremely interested in improving their understanding of financial products but they want space to make their own decisions.6 As a result of their social and digital experience conducting online research comes naturally to them, so they are less likely than other generations to take the advice of a financial advisor without first consulting other sources.  

Experts suggest that when working with millennials, the best approach is to be a collaborator and a partner; educate as well as coach. Taking the time to consult with them and clarify their objectives can pay off for them and you. Studies show financial firms are achieving success by positioning themselves as support services and enabling millennials to fulfill their financial goals when they’re ready.6 

Divide and Concur
The millennial generation spans 17 years and multiple cultures, so one marketing approach won’t fit all. Troy West, a financial advisor and president of Lifestyle Financial Planning, finds it helpful to divide millennials into two age groups—18 to 25, and 26 through 35—because each group is experiencing different life events. 

According to West, the 18- to 25-year-olds are usually dependent or semi-dependent on family for living expenses and may not have many assets. Although these young people may only be able to afford a basic term or whole life policy, they can be good prospects for multigenerational marketing. Working with them, as well as with their parents, could enable you to help them protect themselves against life’s “what-ifs,” maximize their retirement income, and also leave a legacy to their loved ones. The parents may take out policies on themselves and their millennial children as well as become a source of marketing to their parents and siblings.

Millennials age 26 to 35 are often establishing careers, buying homes and cars, and getting married and having children—all top triggers to shop for life insurance. Here, marketing to millennials as well as their family and friends works well, too, advises West. In these situations you may be marketing to households with high incomes who have two sets of parents, multiple grandparents and several children. All are prospects for sales.

Culture can affect how you market as well. Hispanics make up almost 20 percent of the U.S. population and 25 percent of all Hispanics living in the U.S. are millennials. One characteristic that sets them apart from their peers is that they aren’t likely to have a “delayed adulthood.” They often get married and have children earlier than non-Hispanic millennials. In addition, they tend to be more traditional when it comes to long-term savings methods. They seek out advice from financial professionals more often, have a stronger faith in the American dream, and place more value on higher education.7 

Ready, Set, Go
Working with millennials and their families and friends now can dramatically boost your revenue and the future looks even brighter! Why? 

• Millennials are well educated. More than 30 percent of those aged 25-34 had achieved a college education by 2015, up from less than 30 percent for comparably aged young adults in 2000, and up from 25 percent in 1980. This should result in higher earnings for them in the coming years.  
• They’re set to inherit record wealth from their parents. Helping with this transfer of wealth could mean tremendous opportunities for you. Although millennials were raised in the tech age and may use robo-advisors, they’ll still need human advisors to provide a sounding board and objective advice about how to manage changing life events.3
• Fewer employers are offering life insurance to their employees (so the market for individual coverage could increase for all workers). According to a recent LIMRA study, in 2017 only 48 percent of employers offered life insurance to their workers—a decline of 23 percent from 2006.

So, if you’re not working with millennials, now may be the perfect time to start. Ready, set, go! 

Footnotes:

1. Frey, William H. “The Millennial Generation: A Demographic Bridge to America’s Diverse Future.” Brooking.edu, Jan. 2018.
   
2. Krauss, Michael. “Generations Are More than Labels.” Marketing News, Nov. 2015.
   
3. Carlozo, Lou. “Millennials Are Set to Inherit Record Wealth—And the Way they Manage it will be Unprecedented.” U.S. News.com, 10 Aug. 2017.
   
4. Moulton-Abbott, Peggy. “Why the Wealth Gap Matters to Marketing Researchers.” AMA Access, 2015.
   
5. Hess, Abigail. “Here’s How Much the Average American in their 20s Has in Student Debt.” cnbc.com, 14 June 2017. 
   
6. Birkner, Christine. “From Entitlement to Enlightenment.” Marketing News, March 2014.
   
7. Soat, Molly. “A One-Two Punch.” Marketing News, Dec. 2014.
   
8. Barney, Lee. “Two Thirds of Millennials Have No Retirement Savings.” Planadviser.com, 27 Feb. 2018.
   

(Hint: It’s now 36 percent of the marketplace.*)

What product can provide your clients:

• Financial flexibility?

• Guaranteed, tax deferred growth of their money?

• Quick and easy access to this money throughout their life?

• An income-tax-free death benefit to their loved ones?

The answer is whole life insurance.

Although whole life insurance is sometimes inaccurately labeled as “inflexible,” in reality it’s an exceptionally flexible product that can satisfy a variety of client needs. It not only provides a guaranteed, permanent death benefit, but it also can be used as a wealth transfer tool, in business planning, and as an alternative resource in which to store money for unexpected living expenses or to supplement retirement.

Today more than ever, people purchase whole life products for their ability to provide both living and death benefits. Following are some examples of whole life’s extraordinary flexibility.

Mutual Company Dividends

Participating whole life insurance policies are often sold by mutual life insurance companies. In mutual organizations, the policyholders are the “owners” of the company—and when they purchase a participating product, they receive a portion of the company’s profits through a policy dividend. Clients can use this dividend to increase their policy’s death benefit and cash value through paid up additions, apply the dividend toward the premium, or receive the dividend in cash to supplement income or pay down a policy loan.

Benefits of Adding Riders 

PUAs. Whole life insurance enables clients to customize their policies by adding riders. With paid-up additional (PUA) insurance riders, clients can increase their cash value accumulation and death benefits with either a single paid-up additional rider (typically added to the policy at issue) or through the use of a flexible paid-up additions rider. The cash values that accumulate allow the client access to capital that they can use and can serve as an alternative to traditional financing methods. In later years, the cash values accumulated through the PUA riders even can be used to pay the premiums of the policy. 

A single PUA rider can be funded through a 1035 transfer, an inheritance, or another windfall. This rider adds instant, guaranteed liquidity to the policy and an additional paid-up death benefit. A flexible PUA rider is used when clients want to increase the cash values in their policies through periodic payments. The rider offers flexibility in terms of timing of premium payments because the client can choose to pay monthly, quarterly, semi-annually, annually or even by irregularly timed payments. Additionally, the rider offers both minimum and maximum premiums (determined at issue). This flexibility allows the client to navigate financial bumps in life’s road without losing the advantages that the rider offers.

Term.  Term riders were initially designed to provide additional death benefits for a specified period of time. Today, term riders can be used to provide greater earlier cash values in the policy (when used in conjunction with a paid-up additions rider) as well as flexibility in policy design when the client wants to only pay premiums for a short period of time.  This can be as short as two years.  Primary term riders add coverage for the insured on the whole life policy while “other insureds” add coverage to a spouse, or perhaps a business partner, allowing the client to write one premium check and have all the coverage in one policy. Term riders are often available in different  durations.

Accelerated death and chronic illness.  An accelerated death benefit rider provides the insured access to the death benefit prior to death, assuming he or she is diagnosed with a terminal illness. The advance from a death benefit can be used to pay medical costs or other expenses, or improve quality of life while the insured is still living.

Chronic illness riders are relatively new in the industry. They enable the insured to advance portions of the death benefit providing he or she meets the criteria, such as failing two of six ADLs or suffering from an impaired cognitive disorder. Advance payouts in either rider reduce the death benefit that will be paid to beneficiaries.

Waiver of premium on policies and PUAs.  With a waiver of premium rider, if the insured becomes totally disabled, the premiums on the policy are paid by the insurance company—allowing the insured to maintain coverage. The waiver typically is offered as an “own occupation” rider and covers a specific period of time as long as the insured is unable to work at his or her current job. After this time, it means any other occupation the insured could be reasonably expected to perform. 

An additional option offered by some carriers is a waiver of premium rider that covers the paid-up additions rider (as long as the policy was issued with a PUA). If a client purchases a policy with the goal of accumulating cash value, this rider allows the cash accumulation that would have resulted from the PUA rider to continue uninterrupted. The resulting accumulation of cash value can be used to meet whatever specific goals the client has, including to help meet cash flow needs or to replace income lost during the disability.

GPO. Guaranteed purchase options (GPOs) are designed for younger clients who may not currently have the money to buy the coverage they envision they’ll need later in life. GPOs enable these young people to purchase additional amounts of death benefit at specific ages or life events without evidence of insurability.

Premium Payment Options

In addition to the flexibility riders can add to a participating whole life product, your clients also have premium payment options with this product.

PPV/RPU and other non-forfeiture options.  After a whole life policy has been in force for several years, the policy owner may have the option to pay the premiums from policy values instead of paying them out-of-pocket. However, if the policy owner decides to discontinue paying premiums entirely and the cash value in the policy isn’t large enough to pay them, he or she can use the policy’s net cash value to purchase paid-up insurance of the same type as the original policy but with a reduced death benefit. 

Other non-forfeiture options usually include using the policy’s net cash value to purchase term insurance for the full coverage amount provided under the original whole life policy for as long of a term as the net cash value can provide, or surrendering the policy and receiving its cash surrender value.  

Is whole life insurance a flexible and a good choice for most clients? You bet, and I’ve only touched on how policy owners can use whole life’s living benefits throughout their lives. 

*LIMRA, 1Q2016.