Financial professionals often find themselves across the table from clients who are grappling with large life questions. Some of these questions are urgent, such as how to deal with a parent in failing health, while others involve longer-term goals, such as funding college, starting a business or retiring early.
In many cases, the answer to these questions involves a cash value life insurance policy. Yet, few people are aware of how such an approach can work for them. This knowledge gap represents an opportunity for financial professionals to deepen relationships with clients by uncovering a new approach to some of life’s biggest questions.
The most common reason to purchase life insurance — cited by more than half of the respondents to the recent ING U.S. Insurance Revealed study — is to pay off debts or replace income. This appreciation for a life policy’s death benefit feature is reassuring and not surprising.
However, far fewer respondents — as low as 1 percent — saw life insurance as a way to address other financial needs. These results provide a chance for financial professionals to educate clients about the abundant ways life insurance can help them answer important financial questions while also providing traditional death benefit protections. (It’s important to note that the ING U.S. survey data reflects perspectives of adults over age 25 with annual household incomes of $50,000 or more — a group that’s likely to be able to complement their financial portfolios with life insurance.)
While a life insurance policy’s cash value can fund many things, financial professionals would be wise to focus on a few strategies that address major issues on clients’ minds. Here are four questions clients might have that offer you the ability to provide insights about life insurance.
1. How can I help my kids afford a college education?
Most parents dream of a college education for their children but are unsure of how to prepare for it financially. With life insurance, they get two financial tools in one. The first is, of course, the death benefit from a policy, which could help provide college funding if the owner were to die. The second tool is the cash value in a life insurance policy. In this situation, the alive-and-well policy owner could draw on the value to fund one or more years of a college education, depending on the level of cash value.
Most parents don’t know that federal financial aid calculations do not count the cash value in life policies. This advantageous treatment may allow parents to reduce how much they pay out of pocket for a child’s college tuition.
2. How can I help my parents — with money and time — as they age?
Too often, sons and daughters are caught without a clear plan when aging parents suddenly need help. Parents might need financial assistance due to unmanageable medical bills. Or they may need greater personal attention, which could require their children to take time off from work, shift to a part-time schedule, or even take a leave of absence if the situation escalates.
A life insurance policy’s cash value can help ease these pressures. The son or daughter can withdraw policy cash value to help pay large medical bills without having to dip into retirement or savings accounts. He or she may also be able to spend extra time with parents by working fewer hours, making up the pay gap by tapping into the life policy’s cash value.
3. How can I get funding to start my own business?