How should I tell an orphaned client that the original life policy sold to them is not a good policy?

Question

I do not feel 100% confident that the life co. will pay the death benefit. This policy needs to be replaced.

Answer 1

What gives you the idea that the current insurance company won't pay claims? If that company is A.M. Best rated with A- or better, the claims-paying ability and financial condition is at least Excellent.

You don't tell a client that his/her policy is not a good policy. One reason is that you could make the client feel like he/she was less than smart when they purchased it.  And you don't tell them that the company will not pay. These are disparaging remarks about a company or it's policy, which is illegal.

I think you are just wanting to make a sale, and the other policy is using the premium you need to satisfy your own production requirement, or help you win a convention trip.

There is not a "bad" policy. Some are better than others.

Have you done, or are you going to do, a Financial Need Analysis (FNA), or your company's life insurance need analysis to determine what the need is? Or are you just replacing a policy?

When writing the new insurance; if you haven't done, or are not going to do, an FNA, you are doing a disservice to the client. An FNA determines total needs, and if you don't do one, and you don't write enough to cover the total need, or give them an opportunity to cover their total life insurance need, you could be held responsible, and sued by the survivor(s) by not providing enough coverage.

This is the reason for carrying E&O coverage. (Yes, even life insurance agents need E&O.)

If you want to replace the policy in question; how long has it been in force? Can you help the insured by replacing, with a higher face amount, and better benefits? Are you replacing permanent with term? Will you fill out a replacement/comparison form to show the differences to the insured, and to the replaced insurance company? Is the insured in good health?

If you cannot leave the client in better shape with the new policy than you found him/her with the current policy, you are doing a disservice to the client.

ONLY if you can leave the client in BETTER shape than you  found him/her, coverage wise, go ahead. But NEVER make disparaging remarks about another company or the policy it has issued.

If you ALWAYS do an FNA, your're providing a valuable service to your clients. Also, your commission check will be greater, because of higher premiums, and your persistency rate will be higher.

Answer 2

Either the company pays or it doesn't.  That is not an issue with the policy.  

If, however, there are some problems with the policy living up the expectations of the client, that is a separate issue.  It will help if you are able to discuss how the client's goals may have changed, and how the industry or your company has changed.  This takes good listening skills and knowledge.  Then all you have to do is solve their problem, which should be the easy part.