Niche products provide opportunity

As your client’s focus shifts from growing wealth to preserving it, there’s opportunity for insurance planning. And one area that may provide value-added prospects for advisors is the insurance product geared toward niche markets.

There are sales to be made in this market right now, but clients most likely want to see immediate value for their money. Since wealth preservation has become, for many, a much more pressing concern than wealth creation, advisors have an opportunity, says Mark Halpern, a CFP and founder of illnessPROTECTION.com.

“My biggest competition is not other advisors. My competition is getting the attention of my clients or my prospects. When things are really good, people are sailing along believing the gravy train is never going to end,” he says. “When suddenly things get shocked the way they have [in the markets], people start reconsidering and looking at securitizing protection.” Halpern actually has people calling him to buy more insurance. Whatever investments they were planning on moving to their beneficiaries, all of sudden don’t exist. So they feel the need to buy insurance to shore that up.

Even on the value-added side, there are opportunities. For example, insurance planning for children is a cheap and effective way to deploy a small annual amount of money.

Industrial Alliance Insurance, jointly with its Vancouver-based subsidiary Industrial Alliance Pacific, announced the launch of the Child Life & Health Duo, on Monday. The product is a combination of whole life and term critical illness coverage for children aged 15 days to 20 years.

This new hybrid coverage gives parents access to half of the life insurance face amount if their child is stricken with a critical illness, while the life insurance coverage remains in place.

The product is not a big commission generator, but new products like this offer an opportunity to round out a family’s protection coverage and open the dialogue to potentially extending insurance coverage, Halpern says.

“It’s not a lead sale; it has to be part of a comprehensive financial plan. The parents have to be taken care of first, with their own life coverage and planning such as maximizing RRSPs. However, kids are very much part of that total family plan,” he says. “It’s a good thing to be talking to clients about these types of products and at least allow them to say they’re not interested. I’ve seen cases where clients wanted to buy insurance on their kids before themselves, it was that important to them.”

In the case of the Duo product, parents have the opportunity to procure CI coverage for their children for 32 different illnesses, including seven juvenile illnesses for an extra $50 a year, says Jacques Potvin, vice-president of marketing for insurance and individual annuities at Industrial Alliance. In the case of a serious illness, the parents will have access to half the policy’s death benefit coverage.

“If you want to get 20 years coverage for over $100,000, you will pay around $400 per annum. If you want to use our Duo product it will be around $450 or $460,” he says. “Most families are two-income earners, and if the kids get sick, one of the two earners tends to quit their job. Those families will the miss income for that period of time.”

Better still, the underwriting process for children is much easier — premiums tend to be cheaper and there are fewer health risks. Like many policies for children, there are options on the DUO product for the child to continue life coverage after age 30 — even adding to the amount — without further physical underwriting.

The Child Life & Health Duo offers a non-smoker bonus that allows for a 40% increase in the face amount when the child turns 15, by simply filling out a health declaration. This rewards adolescents for having healthy lifestyles.

Potvin points out the 40% bonus can be added to future coverage down the line.

“After 30 years of age, the life coverage is permanent and it is sped up. The amount can be 140% of the original insured amount. In addition, the client has many opportunities to increase that face amount by up to $150,000 more. A child may end up with $300,000 coverage on his life,” Potvin says.

There’s also the opportunity to convert the coverage before age 30 into $70,000 of CI coverage without any medical examination.

Halpern’s company has launched a high-net-worth health coverage product that gives affluent clients access to top U.S. health care centres. The ELITE U.S. Healthcare insurance is available to Canadians only and provides access to medical centres of excellence in the U.S. such as Cleveland Clinic, Sloan-Kettering, Mayo Clinic and John Hopkins in the event of any illness or injury with a wait time for treatment in Canada.

If a client should get any illness, injury or sickness, the policy provides that person with ready access to a second opinion at the Cleveland Clinic in the States. After that a client can select treatment at one of the other medical centres.

The policy covers up to $5 million U.S. for treatment and travel costs, and is geared toward high net worth clients, who need to bypass the Canadian medical wait times. It’s a niche product, but one that can be a lucrative byline of business for advisors, with “really good” compensation Halpern says. ELITE U.S. Healthcare is being distributed by a number of MGAs to independent financial advisors.

According to Halpern a lot of executive groups seem to be gravitating toward this policy, given the 13 to 14 weeks one needs to wait in queue for the Canadian healthcare system to kick in. It can prove an emotional and financial challenge if a C-suite category employees falls sick, he says. “If this product is set up properly, it can be set up as deduction to the company, and as a non-inclusive taxable benefit to the plan member.”

(03/30/09)