The Importance Of Conducting An Insurance Analysis
“When I meet with a family, I always complete a life insurance analysis, which looks at their family structure, their assets and liabilities, and the coverages they have in place through their employer or outside sources,” said Lederman. “Most often I find new clients are under-insured by a wide margin. Many times, they have a preconceived notion of how much life insurance they should have and are surprised by my recommendation, which is usually more than they expected. But once I take them through a life insurance analysis with their own numbers, they understand how the need is calculated, and they tend to agree.”
After evaluating the Hibshman’s needs and family situation (the couple had three children, 18, 10 and 5 years of age) and reviewing the insurance policies they already had in place (including disability insurance through Chris’s employer), Lederman determined that the Hibshmans were grossly under-insured.
“Being the breadwinner of the family, Chris needed an additional $875,000 of coverage on top of what he already had through work and another, smaller life policy,” said Lederman. “I suggested they increase his coverage to total $1 million.”
Initially, Chris was resistant to increasing his coverage amount, even after reviewing the calculations Lederman showed him, something the agent has run into on other occasions.
“When that happens,” he said, “I just reiterate, ‘These are your numbers, not mine.’ ” He, of course, is referring to two key areas: how much money a family will need to meet immediate expenses and pay off debts after the insured is gone, and how much they will need on an ongoing basis to maintain their standard of living.
“I’m a firm believer in standing my ground in a very professional manner in this area. In this case, I am proud of the fact I did not back down on Chris’s coverage amounts, where some advisors may have not taken the same path.”
Ultimately, after taking some time to consider what Lederman had recommended, Chris agreed to move forward and the policy was purchased. Just two years later, when Lederman met with the couple again to convert Chris’s soon-to-be expiring 10-year level term policy, the circumstances were dramatically different.
“I saw that Chris was bald and then his wife gave me the news,” said Lederman. “He had been diagnosed with stomach cancer. Although my heart sank, I was glad that I had convinced him to add more coverage two years earlier and that the term policy was fully convertible without going through underwriting. This allowed him to maintain an additional $250,000 of insurance benefit for his family.”
Unfortunately, a planned surgery to remove Chris’s stomach, pancreas and part of his intestine was cancelled. The doctors had determined that the cancer had spread and was now inoperable—and the 42-year-old man was given 12 months to live.
“I called Sandy the day after Chris’s birthday and she told me the news,” said Lederman. “As bad as it was, I told her she need not worry financially because of the additional coverage put forth two years before and the fact that the policy we wrote had a terminal illness clause allowing the family to receive $250,000 to utilize in any way they deemed necessary. Chris has begun aggressive chemo treatments to slow the progress of his cancer. And he wants very much to take his family (especially his daughter) to Disney World. I am happy to say ‘Go for it and live it up’ since, with the coverage he has, he won’t have to focus on bills and worry about his family’s future.”
Lederman said that his experience with the Hibshmans “has reinforced my belief in the value of always doing a life insurance analysis on new clients and repeating it annually or when their circumstances change significantly. It is our job as advisors to give our clients an appropriate diagnosis of their needs so their beneficiaries can rest assured they will be okay if the inevitable were to happen.”
By Nancy Christie for September 2012 issue of Broker World Magazine. Author’s Bio Nancy Christie is working with The Life and Health Foundation for Education, a nonprofit organization dedicated to helping consumers make smart insurance decision, on this series of articles.