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Sell as much level term insurance as you can before tax changes

Fidelity Life says insurance brokers should be trying to sell as much level term insurance to people as possible between now and June, as life insurance taxation will soon increase premiums.

Thursday, December 3rd 2009, 9:46AM 8 Comments

by Jenha White

Fidelity Life chief executive Milton Jennings says there is a lack of new clients and people need to be sold insurance as it's not going to get any easier.

"We have never seen as much change in the industry as we are now."

He says life insurance companies are going to have to factor in tax as of July next year, and the level premium is likely to go up 15 - 20% whereas yearly renewable term insurance can afford to bring the increases in over subsequent years.

"You can fix a premium in now for the rest of your life on level term. You won't get better premium level rates, people should be taking advantage of that.

"I've personally shifted all my business onto level term," he says.

Jennings acknowledges level term insurance is more expensive to get, so insurance brokers will have to find clients that can afford the change from yearly renewable term to level term.

"It's a no brainer to make the shift if you can though, the break even point is three to four years which is nothing on a 20 year contract."

Fidelity Life says this is a great opportunity as it's Platinum Plus plan has level income protection policy which has guaranteed premiums for all benefits - not just life cover

"It is quite unusual to guarantee premiums but we have, it's a unique product" says Jennings.

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

« Medical insurance requests speed upLife insurance sales soar, as do lapses »

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Comments from our readers

On 3 December 2009 at 11:41 am Majella said:
Way to go, Milton. Conversion of part or all of existing policies has been a key part of my servicing business for a couple of years now. The impending tax changes & increases in premiums are a strong motivator for clients too.
On 3 December 2009 at 3:50 pm Steve wright said:
Yes it is a good idea as long as it is what the client needs.
On 3 December 2009 at 6:17 pm Billy the broker said:
Question for Milton.
Why do you have insurance considering you are a wealthy man, and have the ability to self insure with your financial assets? This looks like a campaign to glean more dollars out of clients to help the profit margins yet again.Sometimes YRT is the way to go, to be cancelled when it is not needed. And Milton may have his numbers wrong when you get ahead when leveling premium by about 10 years.
Comments please people.
On 4 December 2009 at 10:44 am 6ftndr said:
level premiums for income protection don't work, claims make this journey a very hazardous one for everyone involved, especially future clients who will be paying higher premiums for those lucky enough to get the benefit now.
You only have to look at this model based on health assurance via SX, too see how it is doomed.
Even AXA's level premium option, isn't guaranteed level and they increase the underlying rate whenever it is reqd, sort of defeating the purpose don't you think?
Good on Fidelity for doing this but bums will be burnt in the not to distant future.
On 4 December 2009 at 2:12 pm Jackie said:
I have done comparisons for many clients on various ages and I have yet to find a break even point of 3 years? It certainly would be a no-brainer if that were the case - not sure that is indicative of all ages and gender. Would Fidelity look at bringing out a comparison calculator which compares current and accumulated premiums for level against yrt?
On 4 December 2009 at 2:42 pm Andrew said:
Jackie, are you taking into account the 15-20% increase in premiums as of next year?
On 10 December 2009 at 3:01 pm Andrew said:
Jackie, if you are an Xplan user you can jump into Risk Researcher and compare Level vs Stepped premiums across all the companies. It will give you current and cumulative comparisons in an easy to read chart :-)
On 8 January 2010 at 10:25 am Peter said:
Level term's not a new concept - after all, that's what whole-of-life basically was. And nor is the idea that people might have some basic insurance need for 3 or 4 decades. Even 20 years ago, smart advisers were using a two-step approach - whole-of-life (now level term) for the basic cover that would need to be in place 20 or 30 years, plus top-up YRT for everything above that. It was an ideal balance between certainty, affordability and varying needs.
Commenting is closed

 

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