There are only two things your prospect needs in order to have a successful life insurance program. They should have enough of it, and it should be in force the day they die. So the most important questions to ask are: how much and how long?
The prospect wants to protect their loved ones if/when something happens to them. Most prospects only think about covering the cost of a funeral and paying off the house. Some of them even think about the kids going to college, but that is all. But many prospects are not protecting their family members enough. They are not thinking about income.
If a husband is making $80,000 a year, we also need to account for the loss of his income. Sure, the house will be paid off, and the cost of the funeral will taken care of. But is that really enough? The answer is no. The wife will now be without the husband’s income forever. The family has grown accustomed to their lifestyle, and now the income is gone. Even if she is working also, the income that he was bringing in is now gone.
The question is: how many years of income does she need until she either replaces his income or won’t need as much? The house is paid off now, but the rest of the bills still come in each month.
Again, the problem is that a lot of agents and prospects are only thinking of paying off the house and paying for the funeral. This is a huge mistake.
You might want to talk to your prospect about insuring his current income for awhile also. You could, for example, include five years of income at the time he purchases the policy. You want to make sure the spouse would at least have the same amount of income coming in for five years, have the home paid off, the funeral taken care of and maybe also include some college money for the kids.
There are many other uses for life insurance. Some of the personal uses of life insurance are:
Burial expenses — Life insurance will pay for funeral expenses, and benefits can be assigned directly to the funeral home.
Mortgage and debt protection — Life insurance can pay off a mortgage, credit cards, a student loan and other personal debt.
Education — The cash value in a life insurance policy can provide funds for a college education.
Charitable giving — Life insurance can fund a donation to, or an annuity for, a charity, church, foundation or nonprofit.
Estate creation — Buying a whole life insurance policy gives the insured an instant estate and makes him worth a lot more money.
Estate taxes — Life insurance can be used to pay estate taxes when taxes are due.
Inheritance equalization — If the son inherits the family’s $2 million mansion, what does the daughter get of equal value? How about a $2 million death benefit from a life insurance policy? This gives both children an equal inheritance.
Survivor income — Life insurance can provide a lifetime income to a widow or widower when the spouse dies. It’s instant security.
Children’s insurance — Life insurance on a child not only guarantees a death benefit; it also ensures the child will be guaranteed insurable for future life insurance coverage.
Be careful. If a review of this list makes life insurance look like a cure-all for individual financial problems, take another look and realize that just because insurance can be the answer to a problem, it doesn’t mean it’s always the best answer. It’s not a one-size-fits-all tool.