Do I Need Final Expense Insurance?

Do I Need Final Expense Insurance?

Do I Need Final Expense Insurance?

The saying goes “two things in life are guaranteed, death and taxes.” Unfortunately, the costs to the surviving family after the death of a loved one can be a significant financial burden.

This is where savvy insurance agents and advisors can step-in to help their clients protect themselves when they need it most with final expense insurance.

Do I need Final Expense Insurance?

As an insurance agent, do you have the experience and product selection necessary to properly serve your customers?

Are you able to answer the question, “Do I need Final Expense insurance?”

As we will cover in more detail below, the United States has an aging population.

Good insurance agents have a thorough understanding of population demographics and how the many diffferent types of life insurance coverage fits into this.

If you need some help in the understanding demographics topic, I am always glad to help. One of my favorite places for up to date statistics is the US Census Bureau QuickFacts page.

Final Expense Insurance Fills A Need

If you haven’t run into this scenario yet, it’s only a matter of time.

You meet with a potential life insurance customer and run a financial needs assessment.

Unfortunately, the applicant’s age makes standard life insurance too expensive.

Or in some cases, simply not available.

So what is your plan? Your customer is relying on you to offer them products that will help protect their financial future.

Absent any significant savings, retirement, or permanent life insurance coverage, final expense insurance should be your go to product in this scenario.

What is Final Expense Insurance?

It’s a whole or permanent type life insurance policy with a smaller benefit amount, usually from $5,000 to $40,000.

The lower benefit makes it more affordable for older consumers to cover end-of-life expenses like a funeral and burial related costs.

Like the above scenario, these days it’s not unusual to hear about people outliving their life insurance policies.

Unfortunately, most insurance carriers won’t issue new life policies beyond age 75 or 80.

Final Expense Insurance fills this void with issuable age ranges from 40 to 90 years (or older in some cases).

Differences Between Life and Final Expense Insurance

As morbid as this subject may seem, introducing clients to final expense insurance coverage is no different than discussing standard life insurance.

If anything, the need is much greater due to the age ranges of the intended audience.

The primary differences between life and final expense insurance coverages are smaller benefit amounts, a much broader consumer audience, and a more straightforward application process.

How so? Let’s review some features and benefits of final expense insurance products:

  • A simplified issue whole life policy.
  • Benefits available from $5,000 to $40,000 (or more depending on the insurance carrier).
  • Easy application process, no health exam necessary.
  • Rate and benefit locked in for the life of the policy.
  • Issuable age range from 40 to 90-years-old (or higher in some cases).
  • Affordable rates due to a smaller benefit amount.

To understand the importance of these types of insurance plans, one only needs to look at the specific reason for the smaller benefit amount — funeral costs.

Death Costs Have Spiraled Out of Control

Death in the United States is an expensive event.

Death costs have spiraled out of control to the extent that many people literally can’t afford to die.

And that’s without even considering all the legal and estate issues involved.

So, let’s talk about the actual funeral by itself for a moment.

The NFDA (National Funeral Directors Association) estimates the median cost of a funeral with viewing and burial at $7,360. When you add in the burial vault, which is required in many states, the median cost of a funeral is $8,508. These statistics are current through 2016 and the most recent available when this document was published in 2019.

It’s Expensive to Die Anywhere

Please keep in mind that these median costs will also vary depending on the area of the country where you live. For example, downtown Los Angeles will have much higher average funeral costs than the suburbs of Pittsburgh.

It’s expensive to die anywhere these days, but even moreso in LA. And DC. And NYC.

As death costs outpaced average savings amounts, insurance carriers saw a need for older Americans to protect themselves and their families from these end of life expenses.

Unfortunately, obtaining a life insurance policy above age 65 is often cost prohibitive. Final expense insurance seeks to resolve this with smaller benefit amounts and more affordable rates.

Burden of Funeral Costs

More than one-third of adults are concerned with leaving others to pay for their funeral expenses. With many older Americans on a fixed income, the burden of funeral costs will ultimately fall on their children or extended family.

Nobody wants to be the cause of added financial stress, especially when their family is already dealing with the emotional turmoil from the death of a loved one. Final expense insurance can play a part in helping your clients protect their families from this happening.

The Final Expense Insurance Market

Clearly the need for final expense insurance is already here, but what about the market for this product?

With a target audience of older Americans, the final expense insurance market is one of the fastest growing segments of our population.

It should be no surprise to any insurance agent or advisor that the United States is an aging country. These days, it seems like everybody is talking about Baby Boomers getting older.

What you don’t hear discussed very often, however, is their children, the Generation X’ers. Just like their parents, they are getting older too.

Baby Boomers

Baby Boomers are the generation name attributed to the massive increase of children born during the period after World War II.

  • Baby Boomers were born between 1946 and 1964.
  • At their peak in 1999, Baby Boomers numbered 78.8 million.
  • As of 2019, Baby Boomers range in age from 55 to 73.

Generation X

The children of Baby Boomers make up the majority of Generation X. They are sometimes also called the “Baby Bust” due to their much lower birth numbers or the “Forgotten Generation” from living in the shadow of their Baby Boomer parents.

  • Generation X children were born between 1965 and 1980.
  • There are 65.8 million “Gen X’ers,” but they are expected to be a larger population group than the Baby Boomers by 2028.
  • As of 2019, Generation X’ers range in age from 39 to 55.

An Incredible Opportunity

Together these two generations make up a huge population group of nearly 145 million people. This represents an incredible opportunity for insurance agents and advisors to help these families protect themselves from the burden of end of life expenses. The perfect products to handle this are life insurance and final expense insurance plans.

What about Millennials? We keep hearing everybody talking about them. Isn’t our country getting younger?

Older Population

Unfortunately, no.

According to the US Census Bureau, “older population” is considered anybody above the age of 65.

Back in 1970, that was 9.8% of our population.

In 2010, the older Americans group increased to 13.7%.

Now it’s growing at a much faster rate.

By 2030 older Americans will make up 20.3% of the US population.

And 2050 will have an estimated 83.7 million people older than 65.

Annual Death Numbers are Increasing

Sadly, as more people get older, their annual death numbers are increasing. In 2017, there were 2,813,503 deaths in the United States (the latest year stats are available). An increase of 69,255 deaths over 2016. Deaths result in funerals. And funerals cause the end of life expenses that many families need help paying.

The market and the need is here. It’s not a question of ‘do I need final expense insurance?’ It’s when will I need it?

Your Focus is Local

The potential market numbers for final expense insurance might sound massive and overwhelming when taken as a whole. But your focus is local and regional customers that are your part of this broader market.

Your backyard is filled with consumers that need your insurance expertise.

Even in 2019, it’s relatively rare for insurance agents and financial advisors to be licensed in all fifty states and operate a colossal website serving a national customer base.

It’s incredibly difficult. I know this from first hand experience building such a monstrosity.

If this is your goal, great. But you need to start somewhere. So go local. Your local community is a vast untapped market.

The Need for Final Expense Insurance is Already Here

A quick refresher on insurance market statistics from LIMRA’s 2018 Insurance Report:

  • People Need Information: Half of all adults visited a life insurance company website for information on life insurance in 2017. How many of these consumers would have preferred dealing with a local insurance agent or advisor?
  • Online is Popular: 1 in 3 adults either purchased or attempted to purchase life insurance online in 2017.
  • People Don’t Have Enough Insurance: Among the adults with life insurance, about 1 in 5 say they don’t have enough.
  • Insurance Costs are Still a Mystery: Nearly everyone thinks life insurance is much more expensive than the actual cost — especially younger generations. Millennials overestimate the cost of life insurance at FIVE TIMES the actual amount.
  • Most People Don’t Like Needles: Surprise! Those visits by paramed nurses at home or work are still not popular with consumers. Half of all adults say they are more likely to purchase life insurance if it’s priced without a physical examination. Which means most of the consumers you talk to are going to like the simplified underwriting aspects of final expense insurance plans.

The market and the need for final expense insurance is already here. It represents a unique opportunity for the right financial advisors and insurance agents.

Improving Car Buyer Trust with F&I Transparency

Improving Car Buyer Trust with F&I Transparency

Anyone who has ever bought a new or used vehicle from a car dealer has most likely dealt with the F&I Manager or their department. F&I or finance and insurance Managers are an essential position in an auto dealership.

Introduction to the F&I Manager Position

Unfortunately, the subjects of finance and insurance tend to complicate anything they touch. And not just in car sales. As I’ve often explained to new insurance agents and advisors over the years, “keep it simple, complexity leads to confusion and mistrust.”

The F&I department is no stranger to this issue. Which is why, after writing about it for years, I decided to create an overview on improving car buyer trust with F&I transparency along with an introduction to the F&I Manager position.

What is the F&I Department?

In the world of car sales, the F&I department plays a critical role in the successful operation of auto dealerships.

The primary function of the F&I Manager is controlling the sales process through vehicle delivery. A car salesperson handles the initial steps in the sales cycle and eventually helps a buyer pick out the type of vehicle, colors, and options, but the F&I Manager handles everything else.

Job Duties of the F&I Manager:

  • Control the Sales Process – Once a buyer commits to purchase a vehicle, the F&I Manager will step in to handle the rest of the sale.
  • Secure Financing – F&I Managers act as middlemen between the bank or financing company and the car buyer. Experienced managers will work with banks to find the best rates for their buyers based on their credit rating.
  • Add-on Products and Service Sales – The F&I Department directly influences a considerable number of departments and profit centers in a dealership. From warranty and vehicle service plans to value-added after-market products such as truck bed-liners.
  • Handle Vehicle Delivery – the F&I Manager is also responsible for the sales documentation, along with making sure the right vehicle gets delivered to the customer.

Since every car buyer eventually ends up in the F&I Manager’s office, the job they do has the potential to influence the opinion of every customer that buys from a dealership.

Industry Best Practices

F&I is an important position. So how do auto dealerships maintain impeccable standards and the use of industry best practices within the dealership F&I Department? After all, one bad day for an F&I Manager can haunt a dealership on social media for months or years.

Profit Motivations of F&I Managers

It’s no secret that F&I Managers are often the highest-paid dealership employee behind sales managers or owners.

The F&I Manager position involves hard work. But the pay level also lends additional insight into the importance of this job within the dealership operation.

According to salary and income website, payscale.com, F&I Managers have the potential to earn a significant income.

Average F&I Manager Income

  • F&I Manager annual pay ranges from $33,346 to $145,461. That includes salary, bonus, profit-sharing, and commissions. (Payscale, Average F&I Manager Salary.)
  • Experience directly influences annual income ranges for F&I Managers. The national average salary increases to $83,000 annually when it factors in the amount of expertise. (Payscale, Average F&I Manager Salary.)

We’ve covered the various job duties, income, and strategic role of the F&I department. Now let’s discuss how to improve the transparency of the F&I process to help improve car buyer trust.

 

Fundamental Distrust

The profit motivations of F&I Managers are frequent discussion topics throughout the internet, especially in scenarios where disgruntled customers feel slighted by their buying experience.

Unfortunately, this leaves the F&I manager in a vulnerable position that could negatively impact both sales and the performance of other departments within the dealership.

If the customers of a business have a fundamental distrust of the sales process, then that business won’t survive.

Skepticism and Mistrust

Your customers need to trust that you have only their best interests in mind. Otherwise, they will find someone that does.

When that trust doesn’t exist, the relationship is adversarial. Everything you do or say meets skepticism and mistrust of your real intentions. It also removes loyalty from the sales equation.

Service-Driven Customer Loyalty

Without customer loyalty, you are essentially turning your business into a commodity operation. Competing solely on price might work for Amazon, but car dealerships need service-driven customer loyalty to remain profitable.

So how do you fix this? You can talk all you want about how building car buyer trust is your goal, but words are cheap.

You need transparency in the dealership sales process, including F&I, before you can build trust with customers.

F&I Manager Transparency

The F&I department handles complicated finance issues for a dealership. As I mentioned above, anytime you complicate something it adds a level of mystery for customers. Unfortunately, that can also lead to a general distrust of the entire process. People don’t trust things that seem overly complicated or takes a lot of time to understand.

F&I Manager Transparency can be accomplished in several ways:

  • Utilization of new advancements in technology and equipment, such as transactional video recording.
  • Introduce customer training to focus on the needs of the customer. Servant leadership training is an excellent resource for this.
  • Management should include the F&I Manager in future discussions about incentivizing bonus and compensation plans. You might be surprised by the quality of the ideas generated.
  • Create behind the scenes videos, explanation videos, and “how things work” long-form content, similar to this article, to show customers how everything works at the dealership.
  • Put yourself in the shoes of your customer and anticipate their questions and points of confusion. Then create content to answer those questions before they even set foot in the dealership.

Focus on What Makes Money

In any sales compensation structure, employees quickly learn to focus on the activities needed to earn the most income.

Thus, if you tie your F&I Manager’s pay and future employment prospects to product sales metrics, then increased product sales is what you will get.

Protecting the F&I Manager’s Income

If the F&I Manager has nothing to gain out of a particular sale, they can easily adjust the terms. Fortunately, most F&I managers look at the bigger picture and do what’s right for both the customer and the dealership.

Motivating your employees to do what’s right for the customer is essential to your success — unfortunately, many dealerships design F&I compensation without understanding all the possible outcomes. So protecting the F&I manager’s income becomes a source of contention instead of motivation.

For example, let’s say you had a customer with bad credit that turns down every product sale offered. In this situation, the F&I Manager might be less motivated to close the deal when they consider the extra work required and the negative impact on their PVR (per vehicle retailed) ratio.

Safeguard the Integrity of the Sales Process

Many experienced F&I Managers have workarounds and other techniques to pull from to put the customer in a car without taking a hit to their income or performance numbers. Newer managers don’t have that skills set built yet. Either way, it shouldn’t be an issue in the first place.

That’s why it’s crucial to Implement various transparency steps to safeguard the integrity of the sales process. Otherwise, how would a dealership know that this was happening?

TRAINING TIP:

Transactional Video Recording offers dealerships an additional safeguard to protect the sales process and build employee integrity. For example, your F&I manager may have ideas for solutions that can save deals like the above example, without the negative income aspect. Video provides an additional benefit since the F&I manager can show examples of situations where their ideas would work in real-time.

F&I Manager Tips and Tactics:

  • Understand compliance requirements and be the F&I expert for the dealership.
  • Be aware of their profit goals for the dealership while also protecting the interests of the buyer.
  • Control and guide the sale through the dealership.
  • Be accessible to sales staff to answer questions that might help them close the buyer before they reach your office.


TRAINING TIP:

Ask your manager to practice their F&I presentation and sales process while on camera. Invite them to do this alone until they start to feel more comfortable with the process. Then you can slowly introduce other dealership staff to review videos but only allow positive feedback. A poorly executed or ill-timed joke, regardless of the intent, has the potential to destroy any progress you’ve made. Eventually, your employees should be more comfortable on camera.

Consequences of Inaction are Far Worse

Achieving real transparency in your sales and F&I process is possible only with the buy-in from every employee. That takes time to introduce and train properly. Without it, the essential trust aspect will always be missing from your organization.

The consequences of inaction are far worse than the perceived costs associated with the time and resources necessary to implement a program such as this.

Any unhappy customer can broadcast their negative opinion of your business via the public bullhorn of social media. The reputation damage can take months to fix and cost thousands of dollars in missed sales.

Improving Car Buyer Trust with F&I Transparency

Trust is critical for business success in any industry. That’s why improving car buyer trust with F&I transparency is the keystone of a solid foundation of any size dealership.

Transparency is always a good thing.

And a happy customer will provide you with many years of continued business and priceless word-of-mouth advertising.