Eight Life Insurance Mistakes Clients Make

Financial advisors often have to start the conversation about life insurance as the prospect of one’s demise is not an enthusiastic topic. Here are eight mistakes that a conscientious advisor can help a client not fall in to.

• They Don’t Buy It
  • 70% of Americans have not purchased any life insurance, and 75% of millennials do not carry it.
• They Don’t Buy Enough
  • “As a rule of thumb, families should have enough life insurance to cover current living expenses for as long as the children will depend on the parents, plus any higher education expenses.”
• They Buy The Wrong Kind
  • For the young and healthy, term life insurance policies can be more cost effective. Cash-value policies are usually have premiums 10 times higher.
• They But It at the Wrong Place
  • Policies purchased or given through the employer may not remain in place after changing employments.
• They Only Buy It on the Breadwinner
  • Even stay-at-home parents should have life insurance policies on themselves, providing a working parent to devote more time to caring for their emotionally effected children.
• They Don’t Go Long Enough
  • Parents often only purchase policies that extend until their children graduate college. Sometimes these college-educated adults take longer than expected to be self-sufficient.
• They Don’t Protect The Policy Proceeds
  • A coming-of-age adult that receives policy proceeds could be irresponsible with the funds, so establishing a trust can be effective in protecting the proceeds.
• They Cancel It Too Soon
  • Decide if clients should keep a policy is to divide the death benefit by the remaining life expectancy of the insured. If that amount is greater than the annual cost of the premiums needed to maintain the coverage, it’s probably a good idea to keep paying the premiums.

See Kevin McKinley, Eight Life Insurance Mistakes Clients Make, Wealth Management, May 25, 2018.