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Steering Your Clients Toward Permanent Life

Life insurance is a tremendous asset class that provides an impressive amount of flexibility to your clients’ financial plan when designed properly. With limitless possibilities, a well-planned life insurance policy could be the key to present and future financial stability for a family. Life insurance policies offer many benefits, and they can be tailored to fit clients’ wants at every life stage.


Communicate Value and Assess Wants

Life insurance has many nuances, and some advisors are not confident in conveying its value. I like to frame the concept of insurance as a “want” rather than “need” product, because true financial need is difficult to define for most people. In addition, we know people move in the direction of their wants, so I frame the question as if the client has died and then ask him which statement they would rather I say to his widow: “Jan, this is how much Mike wanted you to have” or “Jan, this is how much Mike thought you would need.” Most clients want to leave behind the biggest possible check for their family. However, if we focus only on their “needs,” they may never end up with what they really wanted in the first place. 

Another key consideration is the type of policy your client wants and can afford. Term and permanent policies both offer benefits to loved ones after death, and both lend a degree of flexibility to the financial plan before that point. Although term life insurance is lower in premium initially, over time a term policy will cost more than a permanent policy, especially when you consider the opportunity cost and the want for coverage in later years. Money paid into the policy disappears and is gone forever, and the only thing your family gets in the end is the death benefit, as long as the policy is still in force. With permanent insurance, the client has opportunities during their lifetime to use the living benefits. When clients understand the living benefits of life insurance, they understand the value of how it fits into their overall plan. 

If your client isn’t ready or able to purchase a permanent policy, it’s best to set up a term policy with a conversion option. Once they are ready to build life insurance into their total financial portfolio, the policy can be converted from term to permanent. This conversion privilege may be important due to health changes, so it’s important to write the term insurance with a company that has high-quality conversion products.


Keep Financial Promises With Life Insurance 

At its core, life insurance is a promise keeper. It gives the policyholder peace of mind and the ability to say, “If I’m not here, our dreams for the future will still happen.” With the right plan, the insured can leave behind a check to protect their family’s future, and also use the policy as an asset to achieve financial goals before death. 

Although it’s most often thought of as a benefit to the bereaved, life insurance has significant living benefits for the policyholder, too. Permanent life insurance is not an investment and shouldn’t be used as one. It is a financial tool that offers competitive returns and can be used to achieve financial dreams. Depending on policy structure, its features include tax deferral, tax-free distributions, no-loss provisions (not available on variable life), protection from creditors and lawsuits (in certain states), and guaranteed ability to borrow against the policy with nonstructured repayment plans. One of the greatest living benefits of a permanent policy is the lending opportunities. Loans taken against the policy follow a nonstructured loan repayment, and with certain carriers, disbursements do not diminish returns. This gives clients the flexibility to repay on their own terms while continuing to earn interest or dividends. Policies also can be leveraged as collateral for loans given by third-party sources. 

Living benefits make life insurance a valuable asset for many reasons: to accelerate clients’ personal economy, use the velocity of money and improve financial plans. Loans can be taken out against the policy without jeopardizing accrual or returns and reinvested elsewhere to work in two places at once. When borrowing against a non-direct recognition whole life insurance policy — a guaranteed right — the client still earns the full dividend and the policy grows. Funds can be invested or used to pay for various life expenses, like education for children, mortgages and other needs as lives change. If clients lose their jobs, the cash values inside their policies may be leveraged to keep them on their feet until they find their next jobs.


Communications Are Key to Strengthened Client Relationships 

The agent-client relationship is a long-term partnership, not just a sales pitch. It’s critical for financial advisors to build relationships with clients in order to assess their needs and wants on an ongoing basis. 

Scheduled reviews help agents and clients refine financial strategies and plan for upcoming life developments. Clients’ lives change, and as a result, so do their financial needs and wants. Some clients — especially young and transitioning families — require more frequent communication, as their needs can change dramatically in a shorter amount of time. The key is to be in communication with your clients consistently. Be flexible to their needs so they understand you are there for them.

If you do the right job as an advisor, clients may include you in financial conversations about things even when unrelated to their insurance products and portfolios, like when buying a house or car, to make sure it fits in the plan you have helped them create. 

Not all clients will be open to communicating life changes. However, if frequent meetings aren’t realistic, you still need to reach out to them on a regular basis to open up routine communication. This can be through various channels, such as newsletters, emails or phone calls. These reviews and check-ins not only assess ongoing needs but also remind clients who you are, what they have, why they bought it and how the insurance you have written can help them. 


Confront Misconceptions 

Because there are so many variations and types of life insurance products on the market, clients may have preconceived notions or prejudices against a policy’s implications. Work with clients to illustrate how a policy can be customized. 

Money management professionals often hold misconceptions about life insurance policies as a financial tool. They may believe that a life insurance policy unnecessarily keeps money out of the market, but the accessibility of policy funds makes this a false assumption. Life insurance liquidity gives clients the opportunity to invest in various areas, like stocks and real estate. For example, I can borrow against my life insurance policy, make an investment and pay back the policy with the resulting capital gain. Life insurance is not a competitor to money management; it is a great strategy partner. 

While not having a life insurance policy initially keeps more money in the market, an uninsured client’s death will take the money out of the market to save the family’s financial stability. Money managers and life insurance strategists are natural alliances that should be nurtured.  


Kerry Wallingford, RICP, CLU, ChFC, is an insurance advisor and founder of her practice, Wallingford Financial, based in Seattle. Wallingford is a 17-year MDRT member with two Court of the Table and seven Top of the Table qualifications. Kerry may be contacted at [email protected] .

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