Purchasing a life insurance policy is a thoughtful process. Most people will decide how much life insurance they want to purchase, and how much they can afford. They will talk to insurance agents for comparison prices, visit websites for comparison shopping or discuss their options with a financial planner.
Purchasing life insurance isn’t like picking a box of crackers or cookies off the shelf. Yet, that’s exactly what’s going on at Wal-Mart. Since September 2012, Wal-Mart-one of the world’s largest retailers- and MetLife, Inc.-the largest U.S. insurer- is piloting a test program offering one-year non-renewable Term Life Insurance Policies in the states of Georgia and South Carolina at approximately 200 stores.
For each of the four age brackets (18-44, 45-54, 55-59, 60-65), there are two types of policies. Everyone has a choice of either a $10,000 policy or a $25,000 policy. The younger you are the less expensive the cost of the policy. For example, the youngest age group only pays $69 for the $10,000 policy or $99 for the $25,000 policy. However, if you are between the ages of 60- 65, the $10,000 policy costs $199 while the $25,000 policy is $429.
“I can’t understand why anyone would go to Wal-Mart and get insurance in a box,” says Thomas L. Howard, CFP at David A. Noyes, in Elgin, Illinois. “I don’t see how insurance in a box will be advantageous to the consumer. Consumers have no frame of reference, and they should always compare everything they are going to purchase, including life insurance. Certainly, none of my clients would consider it.”
Currently, MetLife is advertising this program through television commercials featuring Snoopy and Lucy. Consumers can walk into the pharmacy or baby department and find a blue and white box display adorned with the image of Snoopy describing the program. All they have to do to purchase a policy is to decide which age category they fall into, which of the two insurance choices are available to them and pay for the insurance card at the checkout counter.
To activate the prepaid insurance policy, the consumer calls a specific number and answers a few questions from an insurance agent working for MetLife.
- Did you have any recent or will there be an upcoming medical treatment requiring an
overnight hospital stay?
- Do you have any history of alcohol or drug abuse?
- Have you been diagnosed with a terminal illness?
- Do you have HIV or AIDS?
- Do you have any upcoming chemotherapy or radiation treatments?
If you qualify for the insurance, coverage starts right after you qualify. A hard copy of the policy is sent in the mail. Consumers can cancel their policy at any time and receive a refund for the unused months. If you don’t qualify, the representative may present you with other options, or you can return to Wal-Mart and your money will be refunded.
“There are so many better options than one-year policies,” says Brian Greenberg, founder and president, True Blue Life Insurance. “Life insurance is supposed to offer security for families…and that is achieved by guaranteed life insurance policies that are good for 10 to 30 years. I would never recommend that a person get a one-year policy. If someone is in poor health, I would recommend a final expense policy that would be guaranteed up to 100+ years of age.”
According to David Hammarstrom, MetLife Global Brand, Marketing and Communication for MetLife, these two states were selected due to their diverse geography and culture, which makes them quite representative of the people they’d like to reach. If this program meets the internal goals of both parties, the program will roll out in a number of other states sometime in 2013.
“Is buying one-year life insurance policies practical?” says Mark La Spisa CFP, CPS, managing advisor, president of Vermillion Financial, in South Barrington, Illinois. “Not really, but it depends on the purpose of buying life insurance. Typically, people who buy life insurance with the purpose of needing the coverage for the next 12 months are uninsurable.” Adds Spisa: “If you have a lower income and don’t have a financial plan, is a one-year life insurance policy a smart investment? It is not an investment, but perhaps it could be an option for some people. However, low income shouldn’t be the driving issue to buy it or not. There are plenty of options for people with low incomes to buy affordable life insurance. ”At this time, MetLife can’t see a downside to the pilot program. Consumers in all social-economic brackets shop at Wal-Mart– a retailer with a wide reach. This pilot program is also reaching consumers who are not very tech-savvy and don’t want to find life insurance by searching the Internet.
Analysts point out that MetLife wants to cut its expenses by approximately $600 million by 2016. One of the best ways to accomplish this goal is to focus on direct sales and cut out the middleman. Wal-Mart doesn’t see a downside to this experiment. The company sees selling life insurance as a new channel of untapped revenue. For potential Wal-Mart life insurance customers, this method of purchasing life insurance is quite simple. Paying for the policy is like paying for your groceries, cosmetics or toys.