Today’s guest post comes to us from Jason Hochstadt, executive vice president of Jedi Management Inc. and Lifeco Associates Inc. He can be reached at [email protected]
September is an important month for a few reasons. Summer gives way to fall and the football season. Children return back to school, and many parents resume work after the Labor Day holiday. August seems easygoing and filled with vacations; September represents putting your nose back to the grindstone, and facing the last month of the third quarter.
What’s often overlooked is the fact that September is also Life Insurance Awareness Month (LIAM). LIAM is an educational campaign whose purpose is to get consumers to evaluate their life insurance needs and protect themselves and their loved ones through proper life insurance planning. The event represents an industry-wide effort coordinated by the LIFE Foundation, a nonprofit organization dedicated to helping consumers make smart insurance decisions.
As we get closer to year-end and the busy holiday season, now is a great time for you to conduct an inventory of your client’s life insurance, determine if any changes are warranted, and re-evaluate their coverage in light of current life circumstances.
The timing is even more important given the sobering statistics by LIMRA.
- Individual life insurance ownership has hit a 50-year low, with only 44 percent of U.S. households owning life insurance. Yet, half of U.S. households, or 58 million Americans, say they need more life insurance – the highest number ever.
- Approximately 30 percent of households have no life insurance coverage whatsoever, the largest percentage in more than four decades.
- Among households with children younger than 18, 11 million have no life insurance coverage. Forty percent of these households would have immediate trouble meeting everyday living expenses if the primary breadwinner died today, with an additional 30 percent having trouble keeping up with expenses after several months.
- Twenty-five percent of U.S. households rely on group life insurance alone to provide financial protection if a wage-earner dies. Depending on the group insurance contract, these households may lose their coverage if they become unemployed or have their work hours reduced.
- Life insurance beat out all other sources of financial assets or income that individuals expect to use to help pay bills and maintain their lifestyle if the primary wage earner dies. The top two reasons for owning life insurance are to cover burial and final expenses and help replace the income of primary wage earners.
Nearly 80 percent of households do not have a personal life insurance agent or broker to turn to, and most of them said they never did. This means you can fill a great and underserved space in consumers’ lives – and this LIAM, you may want to start by highlighting the many purposes of life insurance, such as:
- Financial protection of dependents, other loved ones, and special-needs relatives
- Burial and other final expense coverage
- Estate planning, taking into account project federal and/or state estate taxes to be incurred
- Wealth replacement. When one or more children work in a family business and one or more do not, life insurance may provide funds to the child/children not involved in the business in order to enable the working child/children to remain in control upon the parent owner’s demise.
- Charitable planning, to assist a charity financially while leaving assets to loved ones
- Business planning, to provide coverage to fund the buyout of a deceased owner’s interest or to provide collateral for debt repayment as part of a loan
- Executive compensation, offering valuable coverage to key employees to provide them with an incentive to remain or accept a position with an employer.
For a family or business, the financial effects of losing a loved one, owner, or key employee can be devastating, both emotionally and financially. Luckily, for a reasonable monthly amount of coverage can usually be obtained to meet different needs.
Whether someone requires one or more policies consisting of term, whole life, and/or universal life insurance is dictated by the unique facts and circumstances at hand. Various life events such as marriage, the birth of a child, divorce and a business adding a new owner may necessitate reviewing one’s life insurance portfolio.
Remember: Life insurance, like all other forms of insurance, is a risk management tool designed to shift one or more risks away from us and onto the insurance carrier.
As with many industries, the life insurance marketplace has undergone recent changes in the areas of product design, underwriting considerations and pricing. As a result of advances in medicine, an ever increasing number of medical conditions are becoming insurable that once were declined. Make sure your clients understand these important points – and that they don’t fall into that significant group of Americans who are undercovered.