Identify the Need for Death Benefit Protection
The need for death benefit protection is primary in most sales of life insurance. Most clients buy life insurance because they have a need for death benefit protection. Other needs such as accumulating cash value, investment purposes or receiving a favorable tax treatment are usually secondary considerations. It is important not only to identify the client’s insurable needs and financial objectives (usually including a need for death benefit protection), but to also document them. If a client’s lawyer or accountant is involved in discussions or determining the needs of the client, it is important to document this fact and any discussions that you may participate in with a client’s advisors. Generally, insurance death benefits can address situations or needs such as:
- Burial expenses
- Income continuation for a spouse or family members
- Accelerated death benefits in the event of terminal illness
- Business planning
- College funding for surviving children
- Retirement funds for surviving spouse
- Asset protection
- Debt coverage Estate taxes and estate planning
- Agents should always help clients identify their death benefit needs.
Calculating the Death Benefit Need
Review the items above and consider what benefits may be available to the client from existing sources, such as, individual or group policies, annuities, and employee benefit plans. You should recommend to a prospect or client a range of possible face values or death benefits.
Identify and Quantify any Goals or Needs for Cash Value
Help clients determine their pre-death goals or contingent needs for the life insurance policy’s cash value. These could include funding a child’s education, supplementing retirement funds, income, or other long-term goals or needs. If you illustrate or recommend partial withdrawals or policy loans to help meet these needs, make certain the client understands all of the limitations, costs, policy charges along with the effect on the net death benefit.