Help Your Clients Identify and Fix Their Life Insurance Coverage Gaps

Whether they’re a brand new client or someone you’ve been working with for years, there’s a good chance one of your customers has gaps in their life insurance coverage. While this can be a risky state of affairs for them, it also represents an ideal opportunity for you to sit down with your client and help them understand all the options at their disposal to ensure comprehensive coverage.

The numbers don’t lie

Based off of recent data from the life insurance industry, it’s clear that many Americans are at risk due to either a lack of coverage or insufficient insurance.

LIMRA reports that life insurance ownership has hit a 50-year low. Meanwhile, even those who own a life insurance policy are less than confident in their current circumstances.

The 2014 Insurance Barometer Study from LIMRA and Life Happens reported that approximately 65 percent of individuals agree they personally need life insurance, with nearly an equal amount saying their existing coverage is not enough.

“In fact, over a quarter of consumers believe they have an inadequate amount of life insurance coverage; a sentiment felt even stronger among women, as well as younger and lower income Americans,” the report stated. “This includes 1 in 5 people who solely purchased individual life insurance, even though they tend to own more coverage than those only covered by group insurance from their employer.”

A separate report from LIMRA found that among middle-market consumers, only 46 percent own individual life policies.

“While 60 percent own group life, the coverage often is less than individual policies and is only in place while the person is employed,” the organization stated. “One in four consumers in the study said they have no life insurance at all. Middle-market consumers also said they were not financially prepared for the death of a family member, with the majority (51 percent) indicating they would need to make a drastic or significant financial change if that occurred.”

Helping clients fill in the gaps

Whether it’s life insurance for estate planning or coverage designed to beef up retirement planning, there are a number of ways you can shore up any holes in your clients’ coverage.

Starting with life insurance, you can explain to clients how choosing permanent life insurance over term coverage can help streamline estate planning and cover the costs of aging, all while creating tax benefits.

For instance, while many individuals have standard life insurance, they may not have enough coverage to contend with the expenses associated with long-term care. Adding a long-term rider to a life insurance policy can help. At the same time, if your client wants to build up cash value with their life insurance as part of their retirement planning without that money going toward care in their later years, investing in a separate long-term care policy may be the right move.

Another risk you may want to advise clients on pertains to disability insurance.

The Council for Disability Awareness reports that more than 37 million Americans are classified as disabled, equaling 12 percent of the total population. What’s more, over half of these individuals are in their working years, between the ages of 18 and 64. While no client may want to think that they could fall victim to a debilitating illness or injury, it’s a very real risk that many people are not prepared for.

In fact, a poll from the Associated Press-NORC Center for Public Affairs Research found that 1 in 4 adults doubted they could pay the costs associated with an unexpected injury or illness. This doesn’t even begin to compare to the long-term costs of treatment and work interruption. A majority of middle-market consumers said they would have to make huge financial changes upon the passing of a family breadwinner. While illness or injury may not be the same thing, it can translate to the same loss of income, if not be potentially more expensive than a death.

As an insurance professional, you can help clients understand the need for disability coverage, as well as the various policies they have to choose from.

Reaping the rewards

Beyond providing your clients with a valuable service, helping them fill in the gaps in their coverage can also benefit you. In today’s marketplace, consumers are more educated than ever on different products and services. However, data shows that many still get stuck when it comes to purchasing coverage, and rely on producers to walk them through the process.

“Nearly 8 in 10 stuck shoppers believe it is the industry’s job to help them understand financial products and services,” LIMRA stated in a recent report. “And, almost 9 in 10 feel that the industry is responsible for helping them to recognize how they would benefit from those products and services. They want you to give them answers.”

One of the best ways to provide these answers is to begin asking your clients questions regarding their coverage.

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