Insurance policies

Help clients reassess their life insurance policies

What do you want to know

  • COVID-19 has given everyone a lesson in the importance of protection.
  • Too many of your clients may still make their ex-spouses their primary beneficiaries.
  • Many other life changes could alter coverage needs.

The unfortunate effects of the pandemic have led many people to increasingly think about their mortality – as evidenced by LIMRA research indicating that 31% of Americans are now more likely to buy life insurance.

Whether your clients decided to purchase a policy within the past two years or did so before the outbreak of COVID-19, September is Life Insurance Awareness Month and offers great opportunity to reassess and possibly update these documents.

I believe there are four key considerations for financial advisors when verifying life insurance policies on behalf of their clients:

1. Identify any life changes.

Significant life changes since purchasing a policy can have a significant impact on your client’s insurance needs.

Do they:

  • Become a parent?
  • Had additional children?
  • Taken on a new mortgage?
  • changed jobs?
  • Are you married or divorced?
  • Have you experienced a change in health?
  • Become a provider/caregiver for a parent or other family member?

Such changes should all be assessed to determine if the current policy is still appropriate.

Anecdotally, I would say about once a month, my firm discovers that a client’s life insurance policy still names an ex-spouse as the primary beneficiary.

Alerting a client to this situation is often greatly appreciated, not only by the client but perhaps also by their current spouse.

2. Assess the current policy,

Even when a policy has been purchased relatively recently, many policyholders don’t have a clear idea of ​​what it entails, so I recommend taking a closer look at those details.

In addition to beneficiary information, advisors should check whether the policy is temporary or permanent coverage and what variables affect the policy.

Another important aspect is whether a font has an updated effective illustration.

If the policy is guaranteed for permanent or term coverage, it will look exactly the same as when the customer purchased it.

But if there are variables, what risks did the client accept and what risks were transferred to the insurance company?

Understanding whether the policy is sound or needs more funding can be very helpful for financial planning.

3. Make sure the insurance company is right for you.

As well as the policy itself, the insurance company providing it must also be well-suited to the client’s needs – and the reassessment process might reveal that it would be a good idea to switch providers.

There are many insurance companies, all offering potential advantages and disadvantages.