A recent survey confirms what many life insurance specialists know from experience: Financial advisors often don’t talk to their clients about this essential coverage. According to the survey, conducted by Saybrus Partners, Inc., just under 50 percent of U.S. adults with a financial plan in place have discussed life insurance with their financial advisor. Among these, just under a quarter (24 percent) said their advisor had recommended adding life insurance.
This creates a huge educational and sales opportunity for insurance agents, who can help clients fill critical gaps in their portfolio. Clients may be missing out on life insurance products that are the foundation of a well-designed financial plan, offering financial protection, tax efficiency, potential for cash accumulation and wealth transfer advantages.
Knowledge clients need
While there are a number of reasons financial advisors may not be talking to their clients about life insurance — it’s too complex; they lack confidence in their own knowledge; they think it dilutes their practice focus — the reality is that clients want to know about all their options.
In fact, the survey showed that even clients who already have life insurance are interested in gaining knowledge. Among survey respondents with life insurance, more than four out of five (83 percent) said they would be interested in adding additional features to their existing policies. Specific features mentioned included coverage for long-term-care needs, features that would allow them to receive a life insurance payout if they were diagnosed with a terminal disease or a waiver of premium payments if they became disabled.
The survey, conducted in July 2011, polled 2,410 adults, 786 of whom have a financial advisor.
The right product at the right time
Part of the reason clients need to hear about life insurance is that this product is timely now. With the volatility in the financial markets, many people are looking for more predictability in their assets. Life insurance that is not tied to the markets offers stability and certainty.
Agents who sell life insurance are well-positioned to reach this market. The survey indicated that people aren’t looking to their financial advisors for guidance; just 38 percent of respondents said they expected their financial advisor to be knowledgeable about life insurance.
While some financial advisors may be interested in collaborating with a life insurance specialist — an arrangement that can work well for both parties — agents can also productively develop their practices on their own.
Filling the knowledge gap: The policy review
One way for agents to open the conversation is to provide a policy review, focusing on critical issues such as performance, affordability and policy lapse. The need is there. Nearly half of respondents with life insurance said their advisors never reviewed their existing policy.
Reviews often reveal that clients have a policy that no longer meets their needs or is underperforming. They may need to increase or decrease coverage, add a long-term-care rider or add or update beneficiaries.