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When Do Your Clients Need to Purchase Life Insurance?

How you can help your clients figure out if now is a good time to buy coverage or when they should re-evaluate their needs.

July 18, 2011
Sponsored by AICPA Insurance Trust

If your clients are like many Americans, they may unwittingly be putting their loved ones at risk of a financial disaster. A recent report conducted by LIMRA finds that nearly a third of Americans don’t have any life insurance coverage. And among those people that have coverage, half (50%) believe their current amount isn’t enough (Household Trends in U.S. Life Insurance Ownership (2010) — Summary, Page 6, Cheryl D. Retzloff, LIMRA.).

Why do so many people lack insurance protection? Many people put off purchasing life insurance because they cringe at the thought of planning for their own demise. However, unpleasant as it may be, your client’s decision to purchase life insurance can impact their loved ones’ plans for the future. That’s because a life insurance benefit can be used by their loved ones to pay for everything from final expenses like a funeral, to living expenses such as mortgage payments, student loans and groceries.

When Should Your Clients Buy Life Insurance?

It’s a good idea to buy life insurance when your clients are young, even if they don’t have any of the traditional needs like a spouse, child or mortgage. That’s because getting insurance now can ensure they will have it when they are older and may not be able to qualify. Purchasing life insurance while young and healthy can also ensure an affordable rate that may be unavailable at higher ages or if your health status declines. But remember, since your client’s needs grow as their life changes, there are some milestones that should trigger a re-evaluation of your client’s current coverage. For instance, have your clients review their insurance needs when they:

  • Get married: When two people combine their lives, they bring their debt along with them. Purchasing enough insurance to make sure your client’s spouse has money at hand to settle their financial obligations, as well as provide for the future if they were to die, is an important step in building a life together.
  • Buy a house: Mortgage payments and living expenses in many instances require two incomes. Without one income, mortgage payments may soon be too much for a surviving spouse to handle. Even if your client’s spouse doesn’t work, life insurance for them is still important because of all of the roles they play in maintaining their lifestyle. Without your client’s spouse, they may have to pay someone to handle the tasks previously done by their spouse.
  • Have a child: Life insurance can help pay for childcare expenses — from day care to college tuition — should your client or their spouse dies. As your client’s family grows, so should their life insurance coverage.

As your client’s lifestyle changes, so should their life insurance coverage amount. And while everyone’s needs are specific to their circumstances, many insurance professionals recommend a benefit amount of five times to 10 times your client’s annual salary.

Make sure your clients don’t wait for a sudden tragedy to force them to examine what their life insurance needs are — act soon to make sure their loved-ones are protected with the right amount of insurance coverage.

For more information, visit AICPA Insurance Trust.