By Bethan Moorcraft | Insurance Business
The problem is, not many consumers are fully aware of the benefits of life insurance and its relationship with strategic financial planning for big decisions like marriage, starting a family, purchasing a condo and so on. That means they’re not always making the best decisions around what policies to purchase, and they’re potentially leaving themselves vulnerable to extra heartache should tragedy strike.
“Insurance brokers need to keep on top of their clients’ life-changing triggers, so they can advise about financial planning and insurance at the points when it matters most,” said Michael Aziz, senior vice president, sales, Canada Protection Plan. “A good advisor will take a holistic approach and will look at current and future needs. Questions a broker might ask some newlyweds include: Do you want to have kids right away? Are you planning to buy a house? Do you want to travel, and if so, where? These are all life triggers that can impact a client’s life insurance needs.”
There are lots of life insurance options out there and everyone’s needs are different. For example, couples can purchase individual policies, or they can opt for joint first-to-die or joint last-to-die policies. Many people also get life insurance through a group plan at work. The various policies can be laddered and leveraged as long-term investment tools.
“A lot of young couples I talk to say they haven’t bought a life insurance policy because they’re insured on a group plan at work. While that group plan might be great, there’s a high chance the coverage will stop if they move jobs, and if conversion is allowed, it’s normally at very expensive rates,” Aziz told Insurance Business.
“Another thing couples often say, especially when they start thinking about having children and having a stay-at-home parent, is that they’re only going to buy insurance for the bread-winner. They need to assess what the impact would be if something happens to the stay-at-home parent. Can the bread-winner continue their current lifestyle or are they going to have to take time off work and hire help? It’s important to have policies on both lives to ensure there’s always protection should an event arise.”
There are many financially beneficial ways to use the policies, but consumer understanding of the product is still quite basic, according to Aziz. Policies can be bought as an investment for children in order to save money for school or a house deposit. They can be used to cover debt and to promote fair distribution of assets after a family member passes away.
“A lot of consumer education is required, but I do believe people are open to learning about life insurance and good financial planning, especially if they’re approaching an important life event,” he added. “I think where brokers, advisors and insurance companies can do a better job is around promoting awareness of the product and its many benefits.”
