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March 11, 2015 at 02:43 PM
Imagine taking your car in for a tune-up and the mechanic only checks the oil and oil filter. That would be troubling if the car has issues with other components that need checking, such as the air filter and tire pressure.
Now think about how you conduct a review of your client’s insurance portfolio. If you’re only reviewing a client’s in-force life insurance coverage, you’re just like the mechanic who only checks the oil.
If I had a mechanic who only checked the oil, I would seek another mechanic to check out everything else. And that is exactly what your clients are doing if you’re only focused in on one particular product line.
Instead of offering what you think the client needs, think about all of the clients’ needs and use a checklist of all the different coverages. During a review, take the time to revisit all of the client’s needs including the usual changes: change in job, marital status, children, etc.
Start with re-assessing a client’s life insurance needs. Does the client have the right amount of coverage? What method are you using to determine the amount of life insurance coverage?
Be sure to document how you arrive at the amount of life insurance coverage. Is the amount based on the recommendation of a financial planner (who will most likely have more financial information than you)? Is the amount based on a needs analysis and stream of income needed?
And are you properly assessing and documenting the clients need for a specific type of coverage? Selling a variable life policy to someone who is getting coverage to provide insurance for children while they go through school would be hard to justify to someone else who comes along.
The product doesn’t fit the need. Yes, there are no suitability regulations that speak to this; however there is taking care of the client and legal liability.
There are very good reasons why so many life insurance policies, especially cash value policies, terminate in the first few years. It’s Occam’s Razor in action: the simplest solution is the best solution.
The client doesn’t need a policy that has surrender charges, complex fees and expenses and high premiums. If a policy owner cannot understand a policy enough to explain its provisions and how it fits in their financial plan, then it’s not a good sale. The policy owner will terminate the policy, as well as the relationship with you, the agent.
Insurance agents do not operate in a vacuum. With the advent of the Internet providing so much information to all, clients can determine on their own whether a policy makes sense.
Or they can turn for help to a financial planner, accountant, family member or fee-based insurance consultant, any of whom might raise troubling questions. Among them: Why does a client who needs coverage only for 10 years, have a policy with a 15 year surrender charge?
