For many of today’s life insurance experts, we entered the business when there were basically two common options for life insurance: term and whole life. Term was analogous to renting new office space while whole was equivalent to buying the building that your office was in.
During the last 10 to 15 years, a myriad of life insurance options have emerged. Today, financial advisors need to take an entirely different approach with senior clients vs. the traditional methods they are used to. Not only have the options changed for the client, they’ve changed for you, too.
There used to be only two options – “rent” or “buy.” Today, there’s a combination of choices including term, permanent, securities-based, guaranteed interest rate-based or a combination of all of them. To help alleviate confusion with the available products, advisors today – in particular senior advisors – should approach their clients on the basis of how long they want the policy in force.
Does your client want the policy until they die, and if so, do they want the insurance company to assume all of the risks in the years ahead? If this is the case, a whole life insurance policy or a guaranteed universal life policy may be the best fit. Or does your client want to share the risks and therefore the rewards with the insurance company, which might suggest they are interested in a variable life insurance policy?
Professional life insurance advisors must sit down with the client and understand what his risk tolerance is, whether he wants guarantees, or whether he is willing to absorb changes in market conditions. Only after understanding these unique aspects of what the client is willing to do going forward can you properly present a policy that is going to serve their needs.
As times change, products change. It is important that we take the time to explain the options available to our clients and also take the time to educate ourselves. There are many resources at our disposal to help advisors learn more about existing products. A variety of Web sites will also help educate your clients about policies, outlining the pros and cons of each. One such site offered by the Life and Health Insurance Foundation for Education, http://life-line.org, will walk a client through the questions that need to be considered to help determine the kind of life insurance that is right for him.
Advising clients, and particularly senior clients, is a combination of math and psychology. It takes expertise in understanding how the life insurance policy works, and an intuitive sense of the psychology behind why the client is considering purchasing life insurance. When you take the psychological motivation along with the risk tolerances as it relates to the math, then you can put together a policy that meets his needs. The key is immersing yourself in the insurance products and making sure you and your client fully understand what each policy means for him.