How to Identify Clients with a need for Life Insurance

As a financial professional you already know why investing is important. You can build an investment portfolio whose design is to accumulate dollars toward every goal a client has. It can be creative, tax-efficient, and even leave your clients with a comfortable lifestyle as they save toward their life goals. But what happens if the client dies prior to achieving his/her investment goals? The best investment plan in the world isn’t worth much if it doesn’t take this risk into account.

If you are like most advisors you are not talking about life insurance even though it is considered a backbone to a financial plan. In fact, a study conducted by Paybrus Partners found that 56 percent of financial advisors will not talk about life insurance even if a client brings up the subject! So, who do you need to talk to about life insurance?

Today it’s all about AUM and Life insurance is the “ugly duckling” that financial advisors do not want to talk about because it’s a tough discussion. However, failing to talk about life insurance may
get you sued.

Who Needs Life Insurance
So, who do you need to talk to about life insurance? Not everyone needs life insurance. If your client is single with no dependents and no outstanding debtss/he may not need life insurance, but may need disability or long-term care coverage. However, if your client has anyone who financially depends on him/her or has any outstanding debts or taxes that will be due at death life insurance should be discussed.

One of the easiest ways to identify who needs life insurance is by looking at their current life cycle stage. Depending on their stage in life and individual circumstances their life insurance
needs can vary greatly.

Early Career Clients – If you have clients with any of the following their need for life insurance is typically HIGH. Do you have clients like this who:
o Have dependents where your client’s income is their sole or primary source of livelihood?
o Provide for a child with special needs?
o Recently purchased a house, started a family, or changed jobs?

Mid-Career Clients – Life insurance need typically remains HIGH during a client’s career building stage as they typically incur more debt. Do you have clients who:
o Recently purchased a larger house/vacation home?
o Recently changed jobs or received a promotion?
o Have a concentrated position in their employer’s stock?

Empty Nester/ Pre-Retirement Clients – The need for life insurance often becomes MEDIUM as debts are paid down, but focus shifts to long-term care and tax favor investing where life
insurance can be used. Do you have clients like this who:
o Have maximized their 401(k) or other qualified retirement plan investment?
o Prefer assets that have the potential for supplemental tax-free income? Prefer assets that grow tax-deferred?
o May have a concern for long-term care expenses?

Business Owner Clients – Business owners have multiple HIGH needs for life insurance. Do you have clients like this who:
o Have key people (owner or employee) which could result in the business incurring significant costs to replace if lost as a result of death?
o Has business debt which s/he may have signed personally or which may be callable at death?
o Would like to provide supplemental benefits for themselves or other key employees?
o Want to help ensure the business can be sold for fair market value in the event of death?
o May desire to provide children with equitable inheritance even if one or more of the children will not be involved in the future of the business?

High Net Worth Clients – Do you have clients who:
o Have assets in excess of $5,000,000?
o Have excess assets in their portfolio that they have earmarked for their legacy?
o May be a business owner looking to provide each child an equitable inheritance?
o May be interested in leaving a significant charitable bequest?

How DBS Can Help
A DBS Field Relationship Manager can help you identify potential life insurance prospects. DBS created a client identification questionnaire to help you identify clients with whom you should have a conversation about life insurance, and we’ve got a page on our website dedicated to understanding your book of business and the varying needs of all client types.