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Beat the Big 4

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Ask people what a human life is worth and they’ll most likely say something like it’s “immeasurable” or “priceless.” Now try asking how much life insurance that person needs to protect their “priceless” asset, and don’t be surprised if your question is met by a blank stare.

Americans realize that their lives are worth a lot, especially when there are people who depend on them financially. In opinion surveys, they usually acknowledge that life insurance is something that the vast majority of people need. But when it comes to owning life insurance, most adult Americans are either underinsured or have no life insurance at all.

If our clients knew how vital life insurance was to their financial plan, then I believe everyone would be insured, most to their full capacity. Insuring your largest asset (yourself) should be a common practice and one of the first things advisors do when working with a client. I have had experiences where a client dies and I’ve delivered the check to the beneficiary. This is the most rewarding and hardest part of the job. If you haven’t done this I encourage you to visit the nonprofit organization Life’s web site and click the “realLIFEstories” tab. After watching those videos your views on life insurance and the benefits they provide will forever be changed.

When dealing with the affluent, or those who would need life insurance to protect their family’s accustomed lifestyle should the unthinkable happen, there are four recurring objections. What follows is a list of these four objections, and what I’ve learned to say to help these families understand the importance of life insurance and making the decision to protect their loved ones for years to come.

“I cannot afford it.” I respond to this statement with a quote. “You cannot afford not to have it.” Most have a hard time paying on something that isn’t tangible. If you look around, these people have really nice cars, beautiful home(s), expensive jewelry and every toy you can possibly imagine. “Why pay for expensive life insurance? I cannot afford that payment. I could go on a lavish vacation or lease another exotic car for the price of that premium.” Ask this question, if something happened to you, who would pay for all your toys? Who would help ensure your family could maintain their lifestyle? Educating the client on the benefit versus the cost is a very important process. It took me a few years to really master this one and now I find it most impactful to use real life examples. For instance, “You do very well income-wise, and have nice savings and belongings, but if something happened to you, who is going to pay for your children’s private school tuition? What piece of land or what percentage of your company is your family going to sell to pay the estate taxes?”

When a premature death occurs, insufficient life insurance coverage on the part of the insured results in 75 percent of surviving family members having to take extreme measures to meet financial obligations, such as work additional jobs or longer hours, borrow money, withdraw money from savings and investment accounts and, in too many cases, move to smaller, less expensive housing. After you illustrate to your client how they cannot afford not to have life insurance, you should be able to help more families protect themselves.

“I already have enough coverage.” I cannot tell you how many times I have heard this. It brings me to a story of one of my first clients. He was a successful entrepreneur worth around $200 million. The first meeting I had with him he told me, “Jay, already I have enough life insurance, so you’re wasting your time.” I asked him to get his polices out for our next meeting. After reviewing his three polices, he had a whopping grand total of $3 million of term insurance in force. It took all I had to keep a straight face. To say he was underinsured was an understatement. According to LIMRA, the unfortunate reality today is that 68 million adult Americans have no life insurance, and most of those with coverage have far less than they need. Many insurance experts believe that a person’s true need for coverage is 10 times their gross annual income and sometimes more. Approximately 500,000 adults in the prime of their lives die prematurely each year in the United States, often leaving surviving family members in dire financial circumstances. This is a direct result of inadequate life insurance protection.

“I am not healthy enough to qualify for insurance.” Three years ago I started to work with a new client who had a very successful business and everything was going great, until he found out he had a brain tumor. When we first met, he said to me that there was no way he could qualify for life insurance. Three months later, we were able to secure him a preferred offer for $8 million of insurance. As we get older, certain conditions become very common: high blood pressure, heart disease, diabetes, cancer and sleep apnea, to name a few. Just a few years ago all of those conditions were either declined by life insurance companies, or the quotes came back as a substandard rate. Now I am seeing those exact conditions come back standard, and in some cases, preferred. The key is to get as much information to the underwriter and have an open, honest dialogue.

“I don’t need life insurance.” This statement might be the most common of the four. Maybe they do not need the life insurance … but their family does. Many people think death will never happen to them, especially premature death. Or if they do think about it, then it will happen. No one knows their future so why not plan for the worst and hope for the best. That is the approach I take with my clients. I explain that in fact, the chances a 25-year-old male will die before reaching the retirement age of 65 are nearly one out of five; and for a female, the odds are one out of nine.
Educating your clients on the benefits of life insurance will help you protect the lives of people far beyond your practice’s reach. Life insurance is an essential tool for comprehensive financial planning, as without it, all the advising you do during the client’s lifetime may not be enough to keep their family secure in the event of the unexpected.