Stages of Life: When Do Your Clients Need to Purchase Life Insurance?

Confused about life insurance? Use these milestones as guides.

August 6, 2009
Sponsored by Prudential Association and Affinity Marketing

If your clients are like many Americans, they may unwittingly be putting their family at risk of a financial disaster. A recent report conducted by LIMRA (Life Insurance and Market Research Association) finds that nearly one-third of Americans don't have any life insurance coverage. And further reporting shows among those people that have coverage, 40 percent believe their current amount isn't enough.

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

But the persistent feeling among consumers is that, despite the odds, they are somehow immune to the hard reality of an untimely death. Studies done by The Life and Health Insurance Foundation for Education reveal the truth: A 35-year-old man has a one-in-six chance of dying before reaching retirement age. The odds are only slightly better for a woman of the same age, who has a one-in-nine chance of dying before age 65.

What to Look For

Most people who have financial obligations such as a spouse or partner, kids, an elderly parent, a business or outstanding loans should have life insurance. But, since needs can grow as your clients’ lives change, there are some milestones that should trigger a re-evaluation of current coverage. For instance, review insurance needs when clients:

  • Get married: When two people combine their lives, they bring their debt along with them. Purchasing enough insurance to make sure a new spouse has money at hand to settle financial obligations, as well as provide for the future if your client 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 him or her is still important because of all of the roles he or she plays in maintaining the couple’s lifestyle. Without a spouse, you client may have to pay someone to handle the tasks previously done by their loved one.
  • Have a child: Life insurance can help pay for child care expenses — from day care to college tuition — should your client or the spouse die. As their family grows, so should their life insurance coverage.

As your clients’ lifestyles changes, remind them that their life insurance coverage amount should reflect the stage they’re at. And while everyone's needs are specific to their circumstances, many insurance professionals recommend a benefit amount of five- to 10-times annual salary.

Encourage your clients to examine their life insurance needs before tragedy strikes. And make sure to offer them a solid Plan with competitive rates and the features they may need.

For more information, visit www.cpai.com/life.