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June 03, 2004 at 08:00 PM
When Talk Turns To How Valuable Riders Are
As much as possible, I keep my ears open for conversations about insurance products and the industry.
As interesting as it is when these discussions take place among insurance professionals, it is more intriguing still when such dialogue occurs among those outside our industry. The comments provide a constant reminder of how complicated the industrys products have become and of how much a producers job is client education in addition to sales.
Of particular interest are the times when discussion turns to the “poor value” provided by insurance and annuity products. Often such disparaging comments come from proponents of competing industries (espousing alternate financial vehicles, perhaps), but sometimes they come from more objective sources (such as well-known, personal finance publications).
What brings this to mind are several exchanges about the added value of specific riders to insurance products. The conversations of particular interest were about return of premium riders on level premium term life insurance and the various guarantees available on variable annuities.
In both cases, one view in the discussions was that the rider(s) in question add little value for the additional cost. In the case of the ROP rider, one argument was that additional unnecessary premiums were paid when, in all likelihood, the contract would lapse before full realization of the extra benefit.
In the case of VA guarantees, the case against these riders centered solely on the increased mortality and expense charges levied against policyholders choosing one or more guarantees.
Among all the conversations about the “poor value” of insurance products or insurance riders, however, few have included arguments against the basic ideas of protecting life value or accumulating money for the future.
