Life insurance is a product that wears many hats: final expense providor, secure investment vehicle, consistent income stream. It is also a product that can be hard to sell, due in large part to consumer misperceptions about cost and relevance. But there are consumers that are demanding this product, and for very specific reasons. Here, we examine five of the top benefits clients expect to receive from their life insurance policies.
1. Providing income for family in the event of death of the primary income earner.
In National Underwriter's recent Life Insurance Study, we asked agents about the primary concerns and goals of their clients. An impressive 75 percent of respondents noted that their clients want life insurance for a very traditional reason: to provide for their family in case of death. This was an overwhelming lead over client concern No. 2, which came in at 40 percent. Raymond W. Johns, an insurance broker in Utah, notes that the peace of mind life insurance offers is something no other product can provide: "Life insurance is the key ingredient for the safety of every family. It is an integral part of any financial plan. We who understand the power of life insurance need to spread the word ... so that [others] clearly understand how important it is for their financial peace of mind."
2. Paying off debt.
When working with younger prospects, producers often hear this classic question: "I'm single with no dependents, so why would I need coverage?" The answer was cited by 40 percent of our respondents as top-of-mind for their clients: Life insurance protects your loved ones from paying off your debts. Which brings us to the No. 3 concern ...
3. Covering funeral expenses
At its roots, life insurance is a final expense product, designed to protect loved ones from the financial cost of death (see our infographic: Death by the Numbers). Today's policies may come with a lot of extra bells and whistles, but many clients want it simply to pay for funeral costs, so that their family doesn't have to. Thirty-eight percent of producers cited this as a top client concern, making it No. 3 on our list. This builds on data uncovered by an earlier National Underwriter research study: In the African-American market, covering funeral expenses is the No. 1 concern, cited by 57 percent of advisors who work with African-American clients.
4. Passing wealth to heirs.
As a financial planning tool, part of the beauty of life insurance is its flexibility. This is a product that can fulfill a variety of needs for a variety of clients in a variety of income brackets. Thirty-five percent of survey respondents noted that passing wealth to heirs was a top goal of their clients. Guy Baker, managing director, BTA Advisory Group, explains why it's important to pitch life insurance not as a product but as a key part of the financial planning process: "We can sell life insurance as a product or part of a process starting with defining the problem and leading to an ultimate solution. Most people are too busy being successful to focus on making a BIG decision. So we break the problem down into little decisions that lead to implementation. Work on the problem, not the solution."
5. Being able to pay for a loved one's education in the event of death of an income earner.
Twenty-five percent of advisors cited education expenses as a primary goal for their clients and a primary selling point for life insurance. And for good reason: As a secure investment vehicle, life insurance is tough to beat. Mark Hug, Prudential's EVP of product & marketing, individual life insurance business says this about why the product is so relevant to so many — and also why a change in public perception is still needed: "The more people understand the relevance of life insurance, the more we can shift the nature of the conversations. Ultimately that change will help people see that life insurance isn't a commodity, but rather a source of protection for their loved ones and a resource for their future."