85% of American households believe that they should own life insurance, but only 62% have a policy. Of those, 4 in 10 have concerns about being underinsured.
Among U.S. households with children, 70% fear that they would be in financial distress if the primary breadwinner were to pass away suddenly.
With so much as stake, it’s clear that one of the most important services an insurance broker or agent can provide is helping a client make a good decision about purchasing an appropriate life insurance policy. “How much life insurance do I need?” is commonly asked by clients and potential clients. It is also one of the hardest because there is no standard answer.
The inconvenient but honest answer is it depends. It depends on unique client characteristics, including their financial situation, their outlook and their values. Some clients want to ensure that their children’s education is provided for, while others focus on resolving the needs of satisfying their mortgage and resolving debt.
When sitting down to do a financial analysis, brokers and agents should be prepared for their client to feel overwhelmed by all the possible and current situations that they need to consider. Will proceeds from the policy last until their significant other retires? Is there enough of a cushion to address emergencies, such as unforeseen home repairs? What type of policy is best suited for them; term or permanent? The list could be endless and it’s completely dependent on the individual.
Brokers, agents, and carriers have sought ways to simplify the process. One approach states that coverage should be five to ten times a client’s annual salary plus their mortgage. Another considers the client’s total financial obligations minus the current resources they have for meeting those obligations.
Whatever approach is used, it is imperative to remember that one simply cannot reduce a client’s rich and complex life to a balance sheet. The best approach begins with an honest and in-depth conversation with the client that looks beyond their finances – and addresses their heartfelt concerns and values.
A qualified broker or agent should feel a healthy measure of pride in engaging in meaningful, and perhaps long, appointment that doesn’t end in an immediate sale. Such professionalism provides a truly important service for the client and places the insurance professional in a strong position to earn their business.
BenAdvance clients have a new tool for broaching the topic of life insurance. Our recently added Term Life policy on the brokerexchanges.com site offers members $150,000 of guaranteed issue coverage. It includes coverage for significant others and dependents. Also included is a living benefit rider, conversion privilege and portability. View current Term Life insurance options on the platform here.