Joint life can shortchange clients

Did you know that the popularity of jointly owned life insurance policies is directly correlated to the decrease in life insurance sales training over the years? Why? Life insurance sales training focused on training advisors how to sell the benefits of the product being recommended not just selling “the lowest price” or “saving you money” approach.

While there are situations where joint ownership is the best answer, all too often joint ownership is recommended without the advisor outlining all of the benefits of each party owning their own contract.

Benefits like total control and owning their own asset in another asset class.

There are a lot of reasons advisors make the mistake of assuming their clients want to pay the lowest possible price for their life insurance coverage or worse, they don’t want to take any more money than absolutely necessary out of the client’s investment accounts.

So, ask yourself why you are recommending a jointly owned life insurance contract? If it is primarily to minimize the cost and save one policy fee – think again before making your recommendation.

Jointly owned policies require agreement from both owners to take any action on their jointly owned life insurance. And other than a death of one of the owners, there is no other predetermined exist strategy.

Remember too that when a partnership breaks up, it is usually the worst time for two people to agree and agreement is needed to affect any change with a jointly owned contract. And what are the options to make changes to a joint policy when a partnership (personal or business) splits up? Not many policies provide for the contract to be split into separate contracts. Also, what happens if one of the parties has become uninsurable, which they may or may not know at the time of the split?

Conversely, an individually owned contract means the individual owner has total control and never needs to bother getting consensus for the actions they may want to take like:

• assigning a contract to their bank as collateral
• taking a policy loan
• changing the deposit rate of their universal life plan
• changing the investment options of their universal life plan
• changing the dividend option on their participating life plan
• cash surrendering some or all of the paid up additions
• converting or partially converting their term insurance plan
• putting the policy on premium offset or premium vacation
• taking a reduced paid up plan
• changing the beneficiary designation

People will buy and appreciate all of the inherent benefits of individually owned life insurance when you clearly show them how the cost – benefit equation works in their favour. And if nothing else, market conduct compliance (full disclosure) and best practices means that you should always show all of the benefits and pitfalls of individually owned contracts as compared to a jointly owned one when the individuals appear to be insurable.

Also remember to avoid the three cardinal sales sins:

• Don’t prejudge a client’s willingness and ability to pay for separate policies.
• Don’t assume that “joint “is the only way to go because of cost savings.
• Don’t minimize the inherent benefits of total control and ownership of an asset in another asset class.

When you got your life licence you learned a life insurance policy is a “unilateral contract”. Your clients don’t need to know or care about that. What they should be aware of is by virtue of that fact, they as owners are in total control.

In an ever changing world “control” is means so much and adds to the peace of mind that comes with the purchase of life insurance.

Helena Smeenk Pritchard has over 36 years of experience in the insurance industry and is the Principal of Helena Smeenk Pritchard & Associates, a leader in “Insurance Know-How” training. Helena publishes a weekly free ‘Did You Know’ newsletter on her site.