The Four Ls of Life Insurance

A new survey released by Bankrate.com and conducted by Princeton Survey Research Associates International documented 4 in 10 Americans with children under age 18 don’t have life insurance leaving families vulnerable in the event of an unexpected death.

Many of those surveyed that do have insurance admit to being vastly underinsured. Life insurance has been providing protection to American families for more than 200 years through the efforts of insurance professionals like you. So, if you are looking for a target market for your business in 2016, look no further!

Why do people purchase life insurance? Sometimes it is mandated by divorce or other legal proceedings. But as a general rule, life insurance is purchased because of Love for someone, desired maintenance of a specific Lifestyle for those left behind after a primary wage earner’s death, as a Leverage play to increase asset values for today or future inheritance, and finally, to provide a Legacy to heirs or charitable institutions upon death of the insured. Many sales will satisfy more than one of the Ls.

Most households include one person who is the primary wage earner. If that person were to experience an untimely death, the tax-free life insurance proceeds could be invested with the earnings used to replace lost income.

In that same household, you may find a stay-at-home spouse who is serving as caregiver for minor children and providing general domestic services to the family. In both instances, a life insurance policy on one spouse—with the other as beneficiary—will secure the family’s future. In addition, many families are raising children with special needs. Often, they live longer lives than their parents, which is a fact of great concern to the parents. Plus, the family dynamic today may include an elderly parent or relative who is dependent for financial and/or health care. These are all examples of Love and Lifestyle sales opportunities.

Funeral, legal and administrative costs associated with death are promptly paid with life insurance proceeds. For some survivors, state and/or federal estate taxes may be owed depending on the amount of assets owned by the deceased. Life insurance proceeds allow loved ones to focus on their grief and rebuild their lives without the financial worry of these expenses, putting these concerns under Love and Legacy.

Cash-value life insurance policies can be used to provide tax-free income during life as a supplement to a pension or to provide future survivor income, thus allowing the pensioner to elect the sole life option, which offers a higher benefit. Using the pension maximization approach to retirement planning for your clients also benefits their heirs by allowing them to select beneficiary(s) to receive any unused funds after the second spousal death. The traditional pension plan does not allow generational beneficiary designations. This would fall under three Ls: Love, Lifestyle and Legacy.

Many of your clients are at the age where the IRS requires them to take minimum distributions from their qualified accounts on an annual basis. Or, they may earn interest from other financial instruments they do not need for daily maintenance. By using these distributions to fund a life insurance policy on themselves, they are able to dramatically increase their heirs’ inheritance through the income-tax-free death benefit. Once again, we see three Ls are at work: Love, Legacy and Lifestyle.

Business owners have special needs life insurance can protect. For example, life insurance is a great source of funding to stabilize a business at the death of a key employee or owner, collateralize a business loan, or to insure a buy-sell agreement. Cash-value policies can also be used to establish a fund to retain key employees (stay-bonus, SERP, golden handcuffs, etc.). Sometimes it is instrumental in preventing family discord by equalizing inheritances between children who are involved in the family business and those who are not. These types of business plans relate to Lifestyle, Leverage and Legacy considerations.

If your client has been a regular contributor to a charity or church, life insurance is a valuable tool to leave a perpetual Legacy after the donor has passed away. Or, if assets are left by will or beneficiary designation to charity, insurance can be used as Legacy planning to replace the wealth in the estate for the heirs.

Life insurance is all about making certain the lifestyle your clients have worked so hard to build for their loved ones won’t be taken from them in the event of an unplanned death. As you visit with clients both old and new, remember to listen for the four Ls that will lead you to your next life Insurance sale.

For tips on having a client conversation where you effectively position life insurance, call the CreativeOne life sales team at 800.992.2642 today.

FOR FINANCIAL PROFESSIONAL USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC.

CP- 0711 – 01/12/16

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