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Make your questions fit your products

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I suggest your planning process always begin with the same basic question: “How do you plan to use this money?”

When the answer is clear, the choice of investments becomes clearer as well. The vast majority of clients that my practice serves require a portion of their accumulated savings be used to generate an income during retirement. As a result, we carve out a portion of their “pile of money” to be used specifically to generate income.

If generating income is your client’s primary goal, your job is to provide them with a lifetime of security thanks to a lifetime of income.

Let’s make a huge leap and assume that you accomplish that task of building a lifetime of income. How do you then invest any additional “surplus” money that your client may have?

With income needs met, and their surplus money in mind, let’s ask the question again: “How do you plan to use this (surplus) money?” Some examples may include travel, hobbies, long-term healthcare funding, inflation protection, gifts to kids, grandkids, church or charity, etc.

Naturally, your investing strategy hinges on your client’s objectives and goals for their family. Depending on their primary aim, you may choose to invest quite a bit differently. For example, investing to fund travel may be a short-term investment if the big trip to Alaska is next summer. On the other hand, paying for a grandchild’s college education may allow you to invest more aggressively in a 529 College Savings Plan. A gift to their church at their death may be invested differently yet, perhaps using life insurance as a planning strategy.  Again, the answer to the question helps us put the proper context and time horizon to the investing strategy.

We recently held an evening education session for our clients on inflation-fighting strategies. Any guesses as to the one spending category that retirees consistently increase as they move through retirement? You guessed it: healthcare and long term care. Every other expense categorically declines over time as a percentage of a retiree’s household income, but healthcare and long term care will categorically increase.  That means that many of your clients should invest some of their “surplus” savings in a strategy to fund long term care expenses.

If your client wishes to prepare for the cost of long-term care, they really have two distinct options: self-pay or insure. Although there are many ways to insure against long term care costs, including hybrid life insurance and annuity products, traditional long term care insurance can still be a very effective leverage tool. The problem? Nobody wants to pay annual long term care insurance premiums. Here’s a compelling option for the person willing to think about the problem differently.

Ask the client to not pay long term care insurance premiums, but rather ask them to allow their investments to pay the premiums instead. In other words, if they have surplus assets, earmark the interest, dividends or returns from those investments to pay the long term care insurance premiums instead of coming out-of-pocket. Simply reframing the decision makes it a lot more palatable and may allow the client to actually feel good about securing the protection that want and need. This strategy allows the client to maintain control of the investment assets while still benefitting from the insurance company’s money should a long term care need arise.

Once you recognize the power of the question, “How do you plan to use this money?” the process of planning becomes much clearer and product choices become more focused as well. No matter what daunting financial news headlines begin to creep up, if you’ve done your planning right, you and your client can smile and know that they’ll be okay regardless of the circumstances.


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