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Life Health > Life Insurance

Planning For Great Expectations

By Staff Writer

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Everyone reading this article started off with a mother. This year, about four million U.S. women will have children. Additionally, more than 700,000 married mothers with children six years old and under have annual household incomes over $100,000, according to the U.S. Census Bureau.

Most new mothers know that giving birth will lead to changes in household finances and insurance needs.

But, in most cases, “they absolutely spend more time thinking about their strollers or their cribs” than thinking about insurance and other financial matters, says Dianne Nolin, a financial planner at Legacy Advisors L.L.C., Tysons Corner, Va.

Gerber Life Insurance Company, White Plains, N.Y., makes heavy use of print advertisements, direct mail and the Web to encourage mothers to buy whole life insurance for their children and term life insurance for themselves.

MetLife Inc., New York, and some other insurers have added financial advice pamphlets for parents to their libraries of consumer education materials.

Many general print and television insurance advertising campaigns remind parents that having children affects their insurance needs.

But, aside from the Gerber Life effort, few of the marketing and distribution campaigns seem to reach out to pregnant women and new mothers as vigorously as campaigns for baby food, diapers or $750 Bugaboo strollers do, experts interviewed say.

Emily Viner, director of agency distribution and development at Guardian Life Insurance Company of America, New York, says she was surprised by the lack of attention she got from financial services companies when she had her two daughters back in the mid-1990s.

“It would have been nice if there were marketing at all,” Viner says.

Life insurers and financial professionals should be trying to do more to educate women who have or want to have children about the critical importance of life insurance and other insurance protection products, says Patty Reiners, an assistant vice president at Ameritas Direct, the direct marketing arm of Ameritas Corp., Lincoln, Neb.

“Someone once said to me, ‘You have to have a car seat to take your baby home from the hospital,’” Reiners says. “‘You should be required to have life insurance, as well.’”

Perhaps because society and the financial services industry are so concerned about the looming retirement of the baby boomers, the supply of public statistical information about mothers and women who want to have children tends to be spotty.

Packaged Facts, New York, estimates U.S. parents spend a total of about $29 billion, or about $1,500 per infant or small child, per year on home furnishings, accessories, clothing and toys for infants, toddlers and preschool children.

But when Aetna Inc., Hartford, and the Financial Planning Association, Denver, sponsored a 2005 survey of 500 pregnant U.S. women, they found that only 56% had tried to create a new family budget and only 29% had spent more than an hour reviewing their health benefits.

Anecdotally, financial professionals in the trenches say even new parents in high-income households need help.

Today, “there are fewer and fewer agents,” says Edward Kelly, a financial advisor in Torrance, Calif., who is affiliated with a unit of Ameriprise Financial Inc. “People are hungry for information, and most people are grossly underinsured.”

How should life insurers and financial professionals go about serving moms?

One important step is to recognize that would-be mothers and mothers are a diverse group of individuals with diverse needs, experts interviewed say. Single mothers, mothers with low-income husbands, mothers with wealthy husbands, mothers with frail elderly parents, mothers of triplets, mothers with jobs outside the home, and mothers who plan to focus on homemaking will have different insurance and retirement planning needs.

Another good step would be to encourage women to come in for help with financial plans and the purchase of appropriate insurance long before they get pregnant, to avoid the possibility that pregnancy complications or random bad luck might make them uninsurable, says Rae Lee Olson, a vice president at Vita Insurance Associates Inc., Mountain View, Calif.

In a perfect world, the initial plan would provide enough life, disability and health insurance to accommodate the needs of all children the mother hopes to have, Olson says.

Any efforts to work with a new or prospective mother should start with a comprehensive of the client’s household finances, the financial professionals say.

“Most women find that they have no real idea of how costly it is to become a parent and have no solid sense of how their financial lives are going to change,” says Brette Sember, the author of “Your Practical Pregnancy Planner: Everything You Need to Know About the Financial and Legal Aspects of Preparing for Your Baby.”

In addition to health insurance for all members of the household, insurance arrangements probably could include:

–Life insurance and disability insurance for the father, assuming he is helping to support the baby.

–Life insurance and disability insurance for the mother, whether she will work outside the home or be a full-time homemaker.

–A retirement plan for the mother and the father.

–A 529 college savings plan for the baby.

–Life insurance insuring the life of the baby. (“A lot of advisors don’t like the idea of talking to parents about insuring children,” Kelly says. But buying permanent insurance can help preserve children’s access to life insurance if they become uninsurable, and putting $10,000 in a variable universal life policy today could provide the child with about $238,000 in retirement assets in 2071, assuming an inflation-adjusted compound growth rate of just 5% per year, Kelly says.)

–Long term care insurance for the mother, father and, if possible, the grandparents. (“Almost no one is going to talk to that mom about long term care,” Kelly says. Few new parents give much thought to retirement plans or LTC insurance, but many are in their late 30s or early 40s and face a small risk of needing long term care themselves sooner rather than later. They may face an even greater risk of having to care for small children and elderly parents at the same time, without outside assistance, Kelly says.)

Some mothers–especially harried new mothers, who may not get “free time” until about 2 a.m.–may prefer to shop for the insurance products and other financial services products they need through the Web.

Shopping via the Web makes it easier to compare product terms and prices, says Reiners, the mother of two daughters.

But some mothers still want to see financial professionals face to face.

Professionals who are mothers themselves may have the easiest time meeting and relating to other mothers, Olson says.

Producers who are not mothers could try speaking at childbirth preparation classes or at parent nights organized by schools or daycare centers, Nolin says.

Other marketing tactics could include advertising in local magazines aimed at parents, setting up tables at baby stores or even trying to strike up conversations at local parks with the mothers who are pushing the $750 strollers.

Once a financial professional is talking to a new or expectant mother, speed and efficiency are vital, experts say.

“I can tell you for certain that pregnant moms and new moms want an insurance agent or financial planner to come to them with a plan that doesn’t require them to make a lot of decisions,” Sember says.

Although getting new moms to think about wills and guardianship may be difficult, that may be key to the planning process, Olson says.

Too often, mothers don’t plan at all “because they don’t like to think about what would happen to the children if they died,” Olson says.

Some other recommendations:

–Take a positive, conversational, educational approach. “Scare tactics don’t work well,” Nolin says.

–Avoid intentionally or unintentionally making clients feel guilty. Instead of showing mothers how far they are from meeting their financial goals, “make them feel there’s something they can do,” Nolin says.

–Know how underwriters at different carriers view pregnancy. Life insurance carriers affiliated with Ameriprise will approve life insurance coverage for women with uncomplicated pregnancy throughout the pregnancy, Kelly says.

But many disability insurance underwriters are leery of pregnancy, especially during the third trimester, and many life insurers also avoid issuing coverage during the third trimester, according to Michelle Mast, an advisor in the Richmond, Va., office of AXA Advisors L.L.C.

Shortly after women have given birth, some may have a difficult time losing enough weight quickly enough to qualify for their pre-pregnancy underwriting class, Mast says.

Thinking about insurance after becoming pregnant “emotionally may be natural but financially may be too late,” Mast says.

–Talk to the grandparents. For advisors who work with older clients, one easy way to help young parents may be to ask regular clients whether they want to provide life insurance for adult children who have become parents, Kelly says.

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