The Times They Are A-Changin’…Will Your Plans Keep Up?

One thing 2020 has been good for, in addition to some great #Thanks2020 memes, is a change in perspective. Take the concept of work from home for example. For many, work from home began as a pilot with only a select few employees allowed to participate. There were corporate policies that governed when and how long it would be permitted. Employees may have had agreements and/or waivers that they had to sign to participate. In many places, work from home got the side eye because of the concern that people would be more distracted, less connected and less productive. Then 2020 stepped in and said, “Hold my beer.” Within days, employees were handed laptops, monitors and phones to set up shop in their dining rooms. We were more distracted, but often it was by the picture hanging on a co-worker’s wall rather than something in our new home offices. Fears about connection went by the wayside, as we were face-to-face with each other to an extent that we had never been while working in the office. Finally, the conversation around productivity quickly went from concern about less—to “holy cow!”—to preventing burnout—to making sure that people are taking time off. That change in perspective was as welcome as it was dramatic. It also serves as a cautionary tale. What we believed to be true yesterday may no longer be true today and we may not know it until tomorrow.

Given that new reality, the challenge for us is to put a plan in place that meets the needs of our clients today and tomorrow, and when, not if, their needs change. The first step in accepting that challenge starts with an honest discussion about permanent insurance. In the past, permanent was any product that could realistically and affordably provide coverage to age 100 and beyond. When juxtaposed with term insurance, the definition held—term insurance for if you die, permanent insurance for when you die. In this binary comparison, it makes sense that the permanent product costs more because it covers a permanent need. However, when we view that justification through the #Thanks2020 lens, it doesn’t hold up the way it used to. When literally everything in our lives can change in an instant, the idea of permanent becomes a movable feast, something that has to move with us as we go through life. Likewise, our permanent insurance solutions need to be flexible enough to move with our changing needs as we go through life. If we are paying for life insurance for when we die, it has to be there when we die. Unfortunately, some of the solutions that we market as permanent today do not measure up.

A guaranteed premium is important, but that alone does not make a solution permanent, even if the premium is guaranteed to age 100. What if the client is furloughed from work and can’t pay the premium for a couple of months? For a year? Is there a safety net that she can rely on to keep her coverage in force? Without non-forfeiture options, like automatic premium loans, the answer is probably no. If the policy does have an option to take an automatic premium loan, then the client can take a loan against the policy cash values to pay the premium and continue the coverage. When she is back at work, she can continue her premium payments, repay the loan, do both, either or neither. The point is that she has options that don’t lapse the policy. That’s a permanent solution. If a temporary change in a client’s income leads to the other permanent policy lapsing, is it really a permanent solution?

A guaranteed death benefit is important, but that alone does not make a solution permanent, even if the death benefit is guaranteed to age 100. Let’s take 2020 and move it 22 years into the future. Your client is thinking about retirement. The permanent insurance policy that he bought from you has served him well, but his kids are grown, his house is paid off and he no longer needs to protect his income for 20+ years. He doesn’t need $1 million in death benefit anymore and he doesn’t want to pay for $1 million in death benefit anymore. What are his options? If the policy that he bought from you doesn’t have guaranteed cash value, then he only has two options if he wants to get anything out of the last 22 years of premium payments:

  1. keep paying premiums
  2. die

If the policy he bought from you does have guaranteed cash value, then he has a bunch of options:

  1. Surrender the policy for the cash value and probably get back most, if not all, of what was paid in premium.
  2. Use the cash value as a single premium and buy a reduced face amount that’s guaranteed for life with no additional premiums.
  3. Pay the premium from policy values and keep the same face amount for as long as the cash value will last.
  4. Start taking income from the cash value and keep the policy in force.

The point is that the client has options that meet his changed needs and provide additional value for the premium payments that he made for the last 22 years. That is a permanent solution. If the other supposed permanent solution can’t provide even one acceptable option to a completely predictable change in the client’s needs, is it really a permanent solution?
Reasonable people can disagree, but in the two situations described here the answer to, “Is it really a permanent solution?” is no. If permanent insurance is for when, not if, the client dies, then permanent insurance needs to provide options for when, not if, the client’s life changes. Guaranteed premiums and guaranteed death benefits do not provide a true permanent solution without the safety net of guaranteed cash values and non-forfeiture options. What does provide a true permanent solution? Participating whole life. Guaranteed premium? Check. Guaranteed death benefit? Check. Guaranteed cash values? Check. Options for when a client can’t pay now or can’t pay at all? Check.

The times they are a-changin’ and we need to be able to change with them. Now is the time to take a new look at an old friend—participating whole life. Remember, life is uncertain. Whole life is guaranteed.

Luke Cosme is senior vice president, chief sales and marketing officer at Mutual Trust Insurance Company, A Pan-American Life Insurance Group Stock Company, where he manages the company's distribution and sales development and support efforts. Cosme joined Mutual Trust in February 2014 after serving for a decade as sales vice president at North American Company for Life and Health, where he was responsible for the recruitment and development of MGA relationships, sales strategies and case placement.

Cosme started his career at North American in 1997 after graduating from the University of Illinois at Urbana-Champaign, where he majored in economics. At North American, he held positions as sales director, financial institutions, and worked in client services before being promoted to sales vice president in 2004.

Cosme can be reached at Mutual Trust Insurance Company, 1200 Jorie Boulevard, Oak Brook, IL 60523. Telephone: 800-323-7320, ext. 5300. Email: cosmel@mutualtrust.com.