When It Comes Insurance Planning, It’s OK to Pass the Baton

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Life InsuranceLife insurance isn’t sexy. It’s kind of like the orthopedic shoes you should wear when you’re doing something that requires walking all day long—not sexy but probably a good idea.

According to a 2013 survey by Saybrus Partners Inc., less than half of advisers surveyed said their efforts to provide life insurance and pertinent advice were successful. Mostly, Financial Advisor Magazine reports, because they feel it detracts from their “regular” business—like the business of investment management.

Clients of all ages may be reading about life insurance and misunderstanding the specifics so they either forego it or make costly mistakes. So brush up on your life insurance knowledge and figure out the best way to address the topic—even if it means passing the baton to a more knowledgeable professional.

Clients Need Help, Are Underinsured
Many articles out there are telling consumers what they should be getting from financial advisers, and one of the most consistent things on those lists is insurance planning.

Unfortunately, the insurance business is complicated and with potential mistakes lurking—like rate increases that come as a surprise, lapses in updating beneficiaries on the policies and missteps with estate taxes—clients need help.

And many clients are underinsured. According to data from the insurance industry association LIMRA, more than 50 percent of consumers ages 25 to 64 are without life insurance coverage. About 44 percent of those have a real need for it, says Kellan Finley, the managing director of the insurance consultancy firm Insurance Decisions.

“The gap between service models can be maddening for clients,” Finley says in an op-ed she wrote for Financial Advisor IQ. “It also elevates the risks that clients face when preparing for retirement or a serious life event.”

Life Insurance at Any Age
It’s time for the youngsters to start thinking ahead also.

Here’s a tip courtesy of Yaron Ben-Zvi, the co-founder and CEO of Haven Life, an online insurance provider: direct your young millennial clients to get life insurance. Sure he may be biased, but he brings up a good point: millennials have debt of all kinds from student loans, mortgages and car loans. If they co-signed for any of those with a partner or a parent, those folks will be saddled with a heavy burden should the millennial client die.The Journal’s September issue will be all about the next generation of planners and clients, and the issue (look out for the link on our Twitter page come September) is chock full of tips for working with millennial clients.

“Though death and debt aren’t typically dinner table conversations, it’s important to understand your financial obligations and how they impact your family,” Ben-Zvi said in a recent interview with Cheat Sheet.

Also, he says, millennials are probably healthy, which could lead to lower premiums. And he’s advocating for planners in the piece, noting that the process is complicated and the choices are many (think term life, whole life, permanent life, etc.)

“You can also go through an agent or a financial planner if you’d like someone to take you through the process,” he advises.

What Can Planners Do?
But if you’re not into the unsexy insurance—or you don’t have the resources for it—then you can partner with an insurance-consultancy firm or work with an objective insurance professional, Finley advises.

Finley notes that advisers should understand the ongoing service that term-life and long-term care policies need and be prepared to be updated with them. She advises to use a CRM system or an Excel spreadsheet to keep tabs of the policies.

“Whether it’s underwriting or explaining insurance jargon, those advisers who use unbiased resources can offload unprofitable work while helping secure the client’s future well-being,” she writes.

HeadshotAna Trujillo
Associate Editor
Journal of Financial Planning
Denver, Colo.

Editor’s Note: For an FPA webinar on how your high-net worth clients may be overpaying to be underinsured, click here. Conducted by Annmarie Camp, senior vice president of national sales and distribution leader of ACE Private Risk Services, and David Spencer, senior vice president of premier client services at ACE Private Risk Services, the webinar offers 1 CFP CE credit.

Also, the August issue of the Journal has more pertinent information on insurance, including life insurance and long-term care insurance. To download the digital edition, click here

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