Insurance should never be sold in a vacuum. It should always be evaluated in terms of the broader, holistic picture of a client’s financial plan.
In the typical and traditional sense of selling insurance, an agent will often look at what someone qualifies for versus what they need.
A married couple ages 49 and 52. The husband earns $350,000 a year, and the wife $200,000 a year.
Determining what this couple qualifies for from a life insurance perspective is usually based off of income replacement: If the husband works the next 15 years making $350,000, his economic value would be $5.25 million. If the wife works another 10 years, her economic value would be $2 million.
$5.25 million and $2 million are the human life value calculations.
What these figures don’t take into consideration are the actual needs of the clients. In this case, we have a family in a unique situation:
- They have a special needs child who requires 24-hour care – a high cost.
- They have $10 million in assets, which they are careful not to deplete in the interest of their child.
- Their spending is low and manageable.
If something were to happen to one spouse, spending is not the issue because their assets are adequate to offset the income loss. It is more important to make sure enough care will be provided for the child. .
Our review concluded that the couple really only need about $1.3 million of coverage on each of them – a big difference from $5.25 million. This is why understanding the difference is so important and addressing insurance from the perspective of the client’s planning is key.
What is unique about the way that we work, and why we find ourselves to be different than traditional insurance agents, is we work with advisors to understand the financial backstory and the financial plan of their clients. From there, we make appropriate recommendations that make sense for their clients’ needs and budget.
How does your insurance process ensure that the recommendations for coverage match the financial plan of your clients?
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