By Gissou Gotlieb, Field Suitability Compliance Officer
In this day and age where most things you can buy have labels advertising “extra-strength”, “long-lasting”, or “more for free” on them, it may be tempting to purchase something that is bigger with more bells and whistles. Life insurance products have also crept into a similar area where you may in some cases expect to get more out of your product than just a death benefit.
Every financial product has a primary purpose and some offer additional advantages or multiple uses. While there may be many estate planning uses for life insurance, the primary reason to discuss such products with a client is to establish and address the need for a death benefit first. State regulators as well as the federal government want to ensure that the sale of life insurance does not happen as a way to avoid paying taxes, and that it is not just a conduit to other potential benefits of the product without justifying the need for a death benefit.
Once you are certain that your client needs life insurance coverage, make sure that they can afford it. There are different types of life insurance policies and each has its own uses, costs, and considerations. No one product type is appropriate for every client or situation and just because some may have bells and whistles, it may not mean they are appropriate for all.
In order to deliver the full emotional and practical benefits that life insurance can provide, it is critical to focus on affordability. The reassurance of a death benefit provided to loved ones in time of grief and potential need is a key reason for purchasing life insurance. The policy remaining in force for the life of your client is key in delivering on that promise. If your client cannot afford their premium for the long term and their policy lapses, they may feel as if they just wasted their money. At that time they may no longer be insurable either, thereby adding to the sense of dissatisfaction. Additionally, this may leave their loved ones in a precarious situation upon your client’s passing, as they will not be able to rely on the protection they thought they had.
Generally speaking, life insurance is meant to be a long-term product. Educate your clients on the cost of insurance, what it means to afford the policy today as well as many years into the future. Assess what type of coverage is needed and if the costs warrant the coverage. Such discussions will help ensure that not only are your clients are well-informed, but that they remain in the product for the intended duration, allowing the product the opportunity to perform as it should and provide the benefits it was meant to offer. By doing this, you also allow yourself to be in a long-term relationship with that client and get one step closer to establishing a relationship with their beneficiaries and children. Good business makes sense in the long run. Sell what your clients need, want, and can afford.
Gissou Gotlieb | Field Suitability Compliance Officer
Ann Arbor Annuity Exchange
Ph: 800.321.3924 x134 | Dir: 734.786.6134
Ann Arbor Annuity Exchange and its representatives do not give tax or legal advice. Please consult your tax advisor or attorney.
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