Insurance Planning: The Business of Protecting Families

Posted by Ethan Young

August 14, 2019 at 1:30 PM

insurance planningEthan Young here, director, insurance and annuities, at Commonwealth. In 2018, Commonwealth established a partnership with Ash Brokerage to enhance the insurance marketing and operations functions available to our advisors. Ash Brokerage doesn’t just specialize in insurance but approaches it with a passion that matches our own company culture. It provides our advisors with untapped growth opportunities in offering protection products for their clients. We see this partnership as a way to bring the best of both organizations to the advisors who affiliate with us. Below, Steven Bressler, risk management consultant at Ash Brokerage, discusses the power of insurance planning and how to talk about it with your clients.

Insurance is not an easy business. Even if it were, your clients would still be unlikely to go out and acquire the proper type and amount of insurance on their own. But it’s so incredibly important, and I know what it can provide for a family when tragedy occurs. I recently received news that a dear friend tragically and unexpectedly passed away. He was 45 and in seemingly perfect health—and in an instant, he was gone. Nobody planned for this. As I cope with this loss, I look at his family and can only hope he had some life insurance in place. Once a person either passes away or goes on claim, that’s when the power of insurance becomes truly clear.

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Thinking Through What-Ifs

The key to proper insurance planning, as simple as it may sound, is pushing clients to “play it forward” with difficult scenarios like the one described above. Insurance is personal, and you’ll find out much more than you anticipated about what’s truly important to your clients when they go through the process of thinking through what-ifs. Such conversations can help you get to the core of your clients’ needs while fostering much deeper relationships. Asking the right questions is not about presenting scare tactics—you should stick to the simple and straightforward notions about who your clients want to protect and how.

What are the consequences if you don’t have it? Keep in mind, people don’t want to buy insurance. Your clients aren’t going to run to you wanting to buy that latest and greatest indexed universal life contract they heard about on the golf course. But you can get them to realize its importance by starting out with this simple question and then repeating it when you bring up various scenarios and options.

Could you afford a second mortgage? Long-term care is shaping up to be a significant financial challenge for retirees across the country. Per Lincoln Financial Group’s “What Care Costs” survey findings, the average home health care hourly rate in Massachusetts is $29 per hour. Twenty years from now, based on an assumed growth rate of 5 percent, this will be around $77 per hour. Assuming a conservative eight hours a day of care, that’s a monthly health care cost of anywhere from $7,000 to approximately $18,000, depending on when your client retires. (Costs vary, of course, from state to state.) A client on a fixed retirement income could have $200,000 a year, dollar for dollar, coming out of the financial portfolio.

You could equate this projection to an unexpected mortgage payment your client will have to start funding. Long-term care insurance prevents sudden twists from derailing your client’s retirement portfolios. That’s why it would make sense to look at your appointment calendar in the next few weeks and identify clients who could benefit from long-term care planning.

What if you got injured and couldn’t work? One of the more alarming facts is that the average worker has a higher probability of becoming disabled than unexpectedly passing away, yet many people ignore disability income insurance or assume their employer-provided plan will sufficiently cover them. In fact, clients often struggle with the nuances of disability insurance and don’t have a good understanding of all the benefits. While the policy and rider options can seem endless, you could keep things simple. Focus on the benefits. As you know, your clients’ most valuable asset is their earning potential—and it needs protecting.

To begin, bring up that original question here: What are the consequences if you don’t buy a disability protection policy? Then, the client will begin to think of the impact insurance can have on a person’s life.

How would your family fare financially if you passed away? Finally, let’s talk life insurance. The purchase of life insurance is an honorable one. It may be the single greatest investment your clients make, with a return they cannot use during their lifetime. Those who ensure that their clients have the right portfolio are in the business of protecting families, yet this topic does not get brought up as much as it should. Think about how our culture has shifted over the past 30 years. Do you remember having your family’s “insurance guy” come to your kitchen table, sit you down, and talk about the whole life policy each person in your family would own? That conversation isn’t happening today, but the need is as important as ever.

All of this brings us back to the same question: What are the consequences to your family if you don’t acquire life insurance? Once you ask it, pause. Let your clients open up—they’ll likely tell you what they care about the most if you give them a moment. Being silent is the hardest part of the process, but it can be the most effective strategy! It’s then that they may recall having received benefits from a life insurance policy when a close family member passed away. Remember, while it makes financial sense, life insurance is also an emotional acquisition.

Balancing Protection and Growth

Protecting your clients’ assets is just as important as growing them. If an unexpected health event or loss occurs, what will be its immediate and ongoing effect on their retirement portfolio? If those contributions aren’t coming in, will that throw off their retirement plan? Protection strategies fit well in these scenarios.

Consider reviewing a disability income retirement security plan where you protect those retirement contributions if the client becomes too sick or hurt to work. Look to a long-term care insurance policy and the power of leverage to protect those qualified funds if your client has a health care event in retirement. Raise the idea of using life insurance as a retirement income stream that arms your client with another arrow in the quiver of retirement flexibility. Based on market performance, you’ll have the option to determine if it’s better to pull income from the retirement account or pull tax-free income from the life insurance policy.

Challenge Yourself

Here’s my challenge to advisors: As you prepare for your next client meeting, add one additional item to the agenda. Don’t start with numbers; start with a candid conversation about playing it forward. Let them open up so that you can gauge if they feel strongly one way or another. If they say they don’t need it, ask them why.

Are the families you work with taking full advantage of the insurance planning options available to them? How do you start conversations about the role of insurance in protecting your clients’ assets? Please share your thoughts below.

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