In anyone’s life, changes will occur that will greatly impact both health and finances. As an insurance agent, you must be equipped to address the top five changes using the tools in your portfolio — and those changes are death, disability, long-term illness, unexpected unemployment, and retirement.
It’s likely rote with insurance and financial professionals, but we can best help our clients if we plan for death, then work backward toward other life changes. So, we view — and sell — life insurance with the assumption that a well-chosen life insurance policy will help create and/or preserve an estate.
That is, it becomes an asset unto itself, which can provide support for dependents. The proceeds from that same coverage might also be used to fund a buy-sell agreement or key-man coverage, as well as to address estate taxes upon a second (spousal) death, when taxes come due.
While term is often attractive to consumers because it can be more affordable initially, we know it can become prohibitively expensive when it is actually needed. As a result, very few term policies ever result in a claim. You may instead want to advise clients to invest in a combination of term and permanent life insurance. Any way you split their investment in a combination of term and permanent coverage, the simple question remains: How much income or assets will have to be replaced by the life insurance, and how do we get you to that amount of life insurance without ever having to invade the principal until it is needed for its originally intended purposes?
Next, clients will want to forecast around the potential for disability and its ramifications. Again, circumstances will differ, but, after placing their life coverage, consumers have to plan for a potential interruption of income through disability. That is critical to all other insurance purposes, as well as to lifestyle. Without disability income, we may not even be able to pay the premium on other insurance, from the aforementioned life policy to a homeowner’s policy. Even so, agents do not often push for disability coverage, and clients often resist it.
Disability income coverage may include something as straightforward as short and long-term disability policies or a combination of employer-provided benefits and the purchase of an individual policy. If an employer provides long-term disability coverage but nothing for short-term disability, you will want to assess assets on hand and determine if a short-term disability policy is in order.
This also is a natural point at which to discuss long-term illness and the increasing options both in terms of care itself and the ways in which to pay for such care. Other than simply restating the availability and importance of having long term care insurance, having home health care coverage as a strong facet of LTCI coverage is important.
LTCI is as significant in estate preservation as life insurance. By our not emphasizing the purchase of a good LTCI policy, we can leave a huge void in our professional planning efforts.
Along with the ever-expanding field of long term care and options relating to such, we’re also seeing an increase in people affected by unexpected unemployment — it’s simply a more frequent occurrence in our new economy.
Along with the old standby of having permanent life insurance and its inherent cash value already in your portfolio, you may want to think outside the box and recommend that clients consider a flexible premium deferred annuity (FPDA). If you can set up a FPDA on a disciplined deposit basis, it is one of the most painless ways to ensure there will be substantial income in the event of job loss or significant career transition.
With these insurance and financial safeguards in place, you will have hopefully gotten your clients safely to retirement. This brings us full circle: With the right complement of life insurance in place, they should have by this point accumulated wealth and be in a position to protect that wealth. That’s a solid stance for retirement.
Now, overlaying all of these change-solution scenarios, another reason to recommend balancing some term life with some permanent life insurance — in order to balance affordability with maximum coverage — is that by simply having substantial life insurance in force, your clients can afford themselves one of the best investments available in two ways.
For one, the return on investment for the right individual life insurance purchase is virtually unmatched under any circumstances. Add to that the availability of life settlements, in which a life insurance policyholder who no longer needs this particular coverage can sell it, and you have a built-in, fail-safe way to generate cash from a life policy or to jettison it in favor of a better position and a better instrument. This affords the policyholder an alternative market in which they can surrender their policy, rather than only being able to let the policy go back to the issuing insurance company. From changes in personal circumstances to changes in tax or estate laws, a life settlement may be another client solution.
You see, just as life is ever-changing, so too is life insurance, and savvy agents can’t forget that. So, a client’s life insurance may safeguard them in any number of ways, including the fact that life insurance itself is one of the greatest commodities one can own. This is enhanced by the fact that, under many circumstances, it can be a marketable commodity even while a client is still alive.
Don’t just help your clients recognize change; help them plan for it.
Fritz Milner is president of Milner Atlanta Brokerage. He can be reached at 800-211-4957 or email@example.com.