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August 31, 2008 at 08:00 PM
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.
Death
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?
Disability
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.
Long-term illness
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.
