Far too often when advisors discuss insurance with clients they overcomplicate things says Michael Morrow, a Certified Financial Planner. “Clients feel exactly the same way we felt when we bought our very first computer. It’s really foggy to them.”
Morrow has an approach that simplifies insurance down to its lowest common denominator so that clients can gain a clearer understanding. The first thing he tells clients is, “I want you to understand that it doesn’t matter what kind of insurance you have as long as the policy is in force when death occurs. Is the death benefit paid out? Yes?” That is the first thing they have to know.
Next, they should understand the difference between the various life insurance policies offered by every company in the world, he says. “The difference is how long is the coverage going to last? Is it going to last 10 years, 20 years, to age 65, 75, or is it going to last for the rest of your life?” Once they’ve understood that, they have to choose how they want to pay for it. “Do you want to have increasing premiums, decreasing premium, quick pay, level premiums, whatever it happens to be.”
To keep things simple, it also helps to understand why people buy life insurance. There are two fundamental reasons, added Morrow. The first reason is they buy it because they need it. “They are always motivated by love. They are always motivated by caring, but they are buying because they need it.” Younger clients buy it for estate creation, they buy it for if they die. The premiums they pay are an expense just like their phone bill, hydro bill, etc.
The second reason, for older clients, is they buy life insurance because they want it. Once again, they are motivated by love. They are buying it for estate conservation. They are buying it for when they die and they are looking at the premium as an investment, he explained.