As a life insurance advisor and someone who’s gone from being obese to being a triathlete, you can be sure that there are two things that make me happy. The first one being when my clients make financial gains and the second being when they level up in their health and fitness.
It’s a bonus to see both of these happen to the same person.
This is exactly what happened to my client, Sudesh Narayanan. At the age of 38 (two years back at the time of writing this article), he purchased a life insurance policy. Given his smoker status, his initial budget for life insurance premiums was $224,000 per annum. He ended up purchasing two contracts from us:
- Universal Life Policy with a life cover of $8,000,000 paying yearly premiums of $200,000.
- Term Insurance Policy with a life cover of $2,000,000 and a critical illness cover of $1,250,000 paying yearly premiums of $19,000.
Fast forward to two years later, he is now aged 40 (at the time of writing this article) and doesn’t smoke at all. Having done his medicals again, he officially got rated as a non-smoker (a big win in itself), and as a result, he was eligible to secure a surplus in benefits from his life insurance policies. We proposed two options to him:
Option 1: Pay lesser premiums for the same cover
This would mean his universal life policy for $8,000,000 which was initially being charged a premium of $200,000 per annum would now go down to a new premium of $116,000 for a period of eight more years. Sudesh’s premiums would then reduce by $85,000 a year, amounting to $680,000 in total savings over 8 years on just this one policy.
His term insurance policy which initially had a premium of $19,000 per annum would now reduce to $10,300 per annum for the next 33 years. He would save about $8,700 a year, which when looked at a period of 33 years, amounts to $287,100 in savings.
When looking at the total savings from this one lifestyle change, Sudesh would have stacked a total of $967,100 saved in premiums for purchasing that same $10,000,000 of life cover. And this doesn’t even account for the gains he would make on that money being invested in the markets.
Option 2: Pay the same premiums and increase life cover
While earlier he could only purchase $10,000,000 of life cover, for the same total premium of $219,000 per annum, today he would be in a position to purchase $15,000,000 of life cover just as a result of going from a smoker to a non-smoker. Sudesh would have increased his life insurance coverage by about $5,000,000, which is a 50% increase.
This has implications for the income Sudesh’s family would receive in the case that something went wrong. Earlier if they received the $10,000,000 of life cover and put it in a deposit giving them 5% per annum, his family would receive $500,000 a year.
Now for the same premium, he can give them $15,000,000 of life cover which means the income per annum goes up by $250,000 a year just as a result of him having switched from smoker to non-smoker.
While both options were a win-win for Sudesh, he ended up choosing the second option.
The financial gains and savings Sudesh created with a simple lifestyle switch are great, but the reality is it doesn’t stop here. As a team, we’re going to reapply to the insurer every year to ensure that Sudesh gets a better price point for his policy based on the fact that his health is improving. Since purchasing his life insurance with us two years back, Sudesh has also started to take his health a little more seriously. From being someone who didn’t work out as much, he’s now got into triathlons and endurance training, increasing his strength and vitality significantly. The insurers are very excited about this as well because he tends to be a lesser risk to them.
Over the course of the next couple of years, I estimate we should be able to bring his premiums down further by at least about 10% per annum, saving him an additional $20,000-$25,000 per annum more than we’ve already saved him.
To anyone who currently has a life insurance policy in place, my question to you is, have you given a thought about whether your policies need to be reviewed? Regardless of the advisor you work with, it is worthwhile to consider whether the policy that you purchased a few years ago is still relevant today if your health has gotten better, or if you are now a non-smoker.
Another thing to consider is if your financial advisor is active enough to constantly come back to you with new solutions by restructuring your existing plans. If you’re new to purchasing a life insurance policy, you may not be aware that these products are not just a one-and-done deal to be had for the rest of your life. These policies can be updated based on new trends and price points in the market. You shouldn’t have to settle for a dud, expensive and outdated product that may have been “best in class” a few years ago.
If you’re a financial advisor, my tip for you would be to go back to your clients and take a look at all your products and services you’ve sold them in the past. Ask yourself if you are doing right by your client. Are you looking out for new clients on a regular basis just to make a transaction or are you constantly reviewing the existing products and services of your clients, to ensure that they have got the benefit of a better product suite? Also, keep in mind that constantly reviewing your client’s product suite relates to additional revenue for you too.
To put this into perspective, for the last fifteen to eighteen years of my life as a financial advisor, over 50% of our income has come from existing clients implementing new solutions with us. We constantly go back to them to review their existing products and services, to talk about additional budgets, whether their liabilities are over now, or a better way to structure their assets.
Rather than focusing on the number of relationships, as a team, we’re focusing on the quality of relationships and delivering the absolute best proposition to the client in the marketplace.
Disclaimer: The above facts, figures, and client information have been slightly modified to protect the client’s identity.