product spotlight
| By Mike Murphy
TERM LIFE INSURANCE
An Antidote for Tough Times
In this weak economy, term insurance is showing its real value: the highest
death benefit for the dollar.
The American market for term life insurance is bigger and broader than ever. This is due to several
factors, primarily related to the still-soft
economy in America and a trend toward
working beyond traditional retirement
ages. Term has always been a great protection solution for young families, but a
tough economy expands the universe of
potential term buyers. Savvy agents and
advisors can provide their clients with an
abundance of reasons to give term life a
close look, right now.
of elderly parents. With life expectancy
rates at an all-time high, people are living
longer; consequently, the cost of providing for their care is rising.
At the same time, nest eggs have
eroded and continue to experience volatility. With declines in the stock market
since 2008, Americans have averaged
more than a one-fourth loss of their
401(k) retirement savings, according
to a recent article in The Washington
Post. Compounding the trauma, some
workers are further depleting their
savings by taking hardship withdrawals from their retirement accounts to pay
for current financial needs. At the same
time, their home values are dropping,
the cost of living is rising and wages are
languishing.
Many of these Americans hope to
recoup their losses before retirement. But
if they die prematurely, their families will
have less money with which to preserve
their standard of living. Term life can help
bridge the gap and at palatable rates, even
for coverage that is obtained later in life.
A decade ago, it wasn’t easy to find a
quality term life product beyond age 55.
But it is now becoming more available.
In today’s market, with more companies
underwriting term life, people in their
50s, 60s and even 70s can still find quality coverage. Furthermore, premiums
have generally continued to decline, while
options (such as term lengths) have, in
some cases, increased. Analysts have
predicted for years that term rates are
bottoming out, but with more insurers
competing, rates remain affordable.
Term life coverage isn’t just for aging
Baby Boomers, of course. Younger people
benefit from it, too. Obtaining some personally owned life insurance early in a career gives clients coverage that is portable
and is not lost if they are laid off, change
jobs or start their own businesses.
An affordable term policy
offers a safety net to
cover potential expenses
until sufficient funds
are available.
The business case for term
First, during tough financial times such
as those we have been experiencing, term
life shows its real value: the highest death
benefit for the dollar. Depending on the
length of the term, premiums are usually
more affordable than those for permanent
life policies. Further, an affordable term
policy can provide a safety net to cover
potential expenses until sufficient funds
are available from savings to protect
those whom the insurance coverage was
intended to protect.
For example, a younger client might
gain peace of mind from a policy whose
term expires near his retirement age,
based on the assumption that by the time
he retires, there will be enough funds in
retirement savings to protect his loved
ones. Conversely, for clients who may
have planned to retire soon and rely solely
on their personal savings—only to watch
those savings take a major hit—term life
can ensure that their family’s standard of
living will be preserved in the event death
occurs before the retirement fund recovers its value.
The fact remains that many people
are working beyond traditional retire-
ment ages and have a spouse relying on
that income. Some may have increased
financial obligations, such as taking care
In spite of our best efforts to educate
clients about the importance of maintain-
ing their own life insurance and other
financial products, many people rely
on employer-sponsored coverage as an
important part of their financial portfolio.
Now is a perfect time to remind clients
that it can be very beneficial to lock in
some personal coverage at low rates while
young and healthy—protection that will
remain in place until retirement, at least.
A product for all seasons
While we’ve looked at the role of term in
a weak economy, it is also important to
remember that in a recovering economic
market, term life remains a solid financial
instrument. Our clients work hard to create a safe, secure life for themselves and
their families. For many, term life is an
important, flexible and affordable part of
that security.
Mike Murphy is vice president of Marketing
Development and Support for American General Life Companies. He is responsible for field
communications, advanced sales and inside
marketing support for life insurance sales.
American General Life Companies,
www.americangeneral.com, is the marketing
name for the insurance companies and affiliates comprising the domestic life operations of
American International Group, Inc.
