You’re Never Too Old to Own Life Insurance!

Posted by DAI Life Brokerage Services on April 15, 2012 · 2 Comments 

Senior clients often assume they no longer have a need for life insurance. Before they ditch that life insurance plan, it’s important to advise them about the countless benefits life insurance can continue to provide—even in their retirement years.

Many clients reach a point in their life when they begin to question the necessity of life insurance. Obviously, their situation has changed quite a bit since they initially purchased the policy. More than likely, they no longer have young children who rely on their income. By now, their children are grown, out of the house and earning their own income. Most of these clients also believe that if they were to die, their spouse would be covered by income from other retirement investments.

However, as advisors, it’s our job to show clients the many compelling reasons for them to hang on to that life insurance policy. Perhaps most importantly, it offers financial peace of mind. As a matter of fact, the more life insurance coverage a person has, the more confident they are about their financial security, according to a Journal of Financial Planning survey.

Of course, financial confidence isn’t the only benefit to life insurance. So before your clients allow that policy to lapse, take time to advise them on the countless advantages life insurance has to offer at any age. Here are five advantages you may want to discuss with your client:

Advantage #1: It prevents financial loss for the client’s loved ones.

Ask your client this: Would any of your loved ones suffer from a financial loss if you were to die? If the answer is yes, then he definitely needs to hold onto that life insurance policy. Remind your client that life insurance is critical for the following people:

• Parents of young children
• Parents of grown children with special needs
• Retirees who will lose a substantial portion of income if one spouse dies
• Families with a large estate that will be subject to estate tax
• Business owners and business partners
• People who want to pass monetary assets on to their heirs tax-free

If your client falls into one of these categories, they still have a significant need for life insurance.

Advantage #2: It ensures a comfortable retirement for your client’s spouse.

While many clients assume their retirement investments would provide plenty of income for their surviving spouse, this is obviously not always the case. Ask your client these critical questions: If I you were to die tomorrow, would your spouse be able to maintain his or her current quality of life? Would he or she still be able to save up for a comfortable retirement? For most retired clients, the answer to both of these questions will be no.

Explain to your client that if his surviving spouse were suddenly faced with a smaller income, she may end up cutting back on retirement contributions to make ends meet. That could put her retirement years at risk. However, if your client were to hold onto that life insurance policy, the proceeds could give his spouse enough income to cover every day expenses, allowing her to continue building up her nest egg.

Advantage #3: It offers quick cash for the client’s family.

Because life insurance proceeds are generally not subject to probate or income taxes, a life insurance payout can provide fast cash for your client’s surviving loved ones. As long as the policy is up-to-date and in order, the beneficiary could collect the death benefit as quickly as a couple of weeks after the policyholder’s death. Explain to your client that this money could prove to be essential to his family at that time. After all, his spouse may be facing massive medical bills, outstanding debts, taxes, probate costs and other final expenses.

Advantage #4: It helps to shield the client’s estate.

If the client owns a successful small business or has a high net worth, her family may be subject to estate taxes after her death. Depending on the value of her estate, these taxes could create serious financial hardship for the client’s loved ones. It’s important to explain to high net worth clients that without life insurance, many or all of their assets could be liquidated in order to pay her their taxes. Of course, wealthy clients can prevent this from happening with a whole life insurance policy.

Explain to these clients that whole life insurance can be used to pay off their estate taxes after death. Not only will this ensure the client’s family doesn’t suffer financially, but it can also protect their business or assets from being liquidated.

Advantage #5: It allows the client to leave behind a legacy.

Life insurance also allows clients to leave behind an inheritance to their children or grandchildren. Point out to your client that this money could help pay for his son’s graduate school expenses or his granddaughter’s wedding. Even if the client’s family doesn’t necessarily need this money, the client may want them to have it. For some clients, it may be worth it to give up some income now to make sure their loved ones receive a special gift later.

You should also advise clients that could use the proceeds from their life insurance policy to make a significant contribution to their favorite charity. If there’s a special charity that’s near and dear to the client’s heart, they could continue to pay just a little into a life insurance each month so they can leave something behind to the cause.

Of course, every client is unique, and they will all have different views on whether or not they should keep paying into a life insurance policy. Take time to evaluate each client’s distinctive situation and discuss all the pros and cons.

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