Life insurance. It’s not something you talk about – you don’t tell your friends about the great policy you just got, or how you aren’t sure how much life insurance is enough. With September being Life Insurance Awareness Month, I wanted to explore the reasons so many Americans are under covered. I interviewed two reps here in the office regarding life insurance to see if they notice any trends among current and prospective clients:
What are your clients’ most common objections to getting life insurance? What are your counter arguments?
Rep 1: The first objection is “nothing is going to happen to me.” When they say this I usually “Kill the Client.” I walk them through a scenario of their death and what happens afterward. I bring up the hardship they put on their spouse or other family (think: paying debt, paying bills, or saving for retirement with one income instead of two). Life insurance isn’t for the benefit of you, it’s for the benefit of your loved ones. The second objection is cost. I like to compare this to their auto insurance – let’s say they usually pay $80 to $120 per month to insure a $10,000 to $20,000 vehicle. The loss of income due to death could be in the millions and you do not want your loved ones paying for that without insurance!
Rep 2: Three things:
- They don’t feel they need it.
- It’s too expensive.
- Nothing is going to happen to them.
My goal is to educate individuals when going through their unique situation. Explaining why life insurance is important for them or their family in the event something happens to them, and then showing them life insurance is affordable.
Who needs life insurance? What are the reasons for life insurance at various life stages?
Rep 1: Everyone needs life insurance, it’s just a matter of how much. Young students with no debt could simply have enough to cover funeral expenses, and the elderly can use it for a tax-free way to pass money on to their heirs or pay for funerals as well. The biggest need for life insurance that I run into is supporting families, covering debt, and estate planning. Any single person with debt should have at least enough life insurance to cover it – it eliminates the huge headaches and potential financial hardship of their parents/siblings.
Anyone with a spouse or children should also have life insurance. Covering your income is the biggest thing in the event of your death. Your spouse and children would still be dependent on your income, and may need to hire help to complete the tasks you used to do. Lastly families or individuals with enough net worth to have to deal with the death tax should have life insurance. Life insurance is the easiest way to pass assets on to your heirs while avoiding unnecessary taxes like the death tax.
Rep 2: Not everyone needs life insurance. The purpose of life insurance is to make sure that your kids, spouse, loved ones, or other people who depend on you for financial support will be okay if you die prematurely. If there is a need. My rule of thumb is having enough coverage to pay off your liabilities, fund your funeral, fund college accounts for your children, and have enough left over for your spouse or loved ones to adjust financially. As your needs change so should your life insurance.
When a client approaches you about life insurance, what inspired them to do so?
Rep 1: Clients approach me about life insurance most often after some type of tragic event. Most the time people don’t get serious about life insurance until it’s too late. Don’t be the reason other people are coming to their financial advisors. Have the appropriate life insurance on yourself so that your loved ones are taken care of, and you don’t become the horror story people will talk about.
Rep 2: Typically, a life changing event. Either they got married, or are starting a family. Also, often individuals leave a job that provided life insurance and now need to replace the lost coverage.
Overall, do you find that people are under-educated about life insurance? What’s the one thing you wish everyone knew about life insurance?
Rep 1: I do believe that people are under-educated about and under-funded by life insurance. Insurance is a word just like “annuity” that scares people away. Many think agents are just trying to get a sale, but there is so much more to life insurance than just the insurance aspect. Life insurance products have developed greatly in the past 5-10 years, and many can be used as investment vehicles, self-funding loans, LTC solutions, and more.
Rep 2: Yes. You can insure yourself all you want, but having the proper life insurance is very important to your overall estate plan. The younger and healthier you are, the less expensive life insurance is. Just like investing, it’s important to start planning early.
As you can see, our reps have varying approaches to life insurance, but they both agree – life insurance provides peace of mind for your loved ones if you pass away prematurely.