Times are tough, jobs are scarce and many families across the nation are struggling financially. Recent trends show that consumers are focusing on saving more, spending less and paying down their debts. In such in a tumultuous economy, many agents worry that clients might start cutting out the “unnecessary” expenses like life insurance. However, that’s absolutely not the case.
Americans are beefing up life insurance
In these difficult times, Americans recognize that life insurance is more important than ever. As a matter of fact, 56 percent of Americans say the economic downturn has made life insurance more critical, according to 2009 survey released by the nonprofit LIFE Foundation.
Based on the survey, a mere nine percent believe the need for life insurance has diminished. And 2009 trends supported these survey results: In 2009, it appeared that more people added to their life insurance coverage rather than cutting back or dropping their coverage.
The LIFE survey also found that 71 percent of Americans with life insurance made no changes to their coverage. Of those who did make changes, 39 percent increased their coverage. Another 28 percent bought life insurance for the first time in the past year.
So, why are more consumers buying life insurance? Two of the reasons survey participants gave were a need to keep up with their growing family’s obligations and a desire for extra protection because they feel more financially vulnerable in light of recent economic events.
A historical trend
This nationwide boost of life insurance is certainly not a modern phenomenon. Historically, the U.S. life insurance industry has seen a hike in sales during economic downturns. Why? Many experts believe that consumers already feel defenseless in tough economic times, and they want to better protect their family’s financial well-being.
“The American people are smart and understand the importance of protecting their loved ones with life insurance, especially in these uncertain financial times,” said Marvin H. Feldman, president and CEO of LIFE, in a press release. “Americans realize that life insurance can be the safety net that catches their family when tragedy strikes, and we’re pleased to see that so many appear to be holding onto their coverage, even as they’re scaling back other parts of the family budget to make ends meet.”
Identifying the necessity for life insurance
Any capable financial expert will advise a client that life insurance is absolutely necessary—especially if the client has loved ones who depend on his income. How would the family survive if your client’s income disappeared today as a result of his death? How would they pay the bills and maintain their current standard of living? Would your client really want his spouse to return to the workforce in this discouraging employment environment? And would there be enough money to still send the kids to college?
An effective life insurance plan ensures that all of a family’s financial needs will be covered—from the monthly mortgage and utility bills to a child’s college education. For nearly all of our clients, in these economically uncertain times, this protection is more important than ever.
Let’s assume your client has grown children that have moved out on their own. Is it acceptable for the client to let that insurance lapse or to cash it in? Not necessarily. Life insurance fills many more purposes besides satisfying the financial demands of raising children.
Final expense insurance, otherwise known as burial insurance, is one type of policy that should always be kept in force. Even portions of larger life insurance policies are usually allocated to cover one’s final expenses. Other possible expenses that a client can leave behind include medical bills, estate taxes and unpaid credit card debt. Considering the average funeral costs $10,000 or more, most clients would prefer to plan properly for those expenses rather than leave this heavy financial burden on their loved ones’ shoulders. In these difficult times, very few of our clients have enough cash on hand to meet these costly obligations.
Life insurance is a great legacy planning tool as well. Charitable contributions, funding a grandkid’s college, or providing a stream of income to a disabled child are all goals that you can help your client realize with proper life insurance planning.
Making room in an already tight budget
There are many affordable term life insurance options available for families with tight budgets. For example, if you have a healthy 35-year-old client, she could purchase a 10-year $250,000 term policy for around $180 a year. That breaks down to less than 50 cents a day. And any financial advisor worth their salt can find 50 cents a day in a client’s budget. Whether you use interest from a CD, dividends from investments, or even earnings from annuities, there is always a way to fund life insurance. Remember to impress upon your client that any life insurance, even just enough to cover final expenses, is better than no life insurance at all.
Work with your clients to determine the right amount and the right type of life insurance they need—and remind them of the legacy they will be leaving behind.