Many people understand that they need life insurance. After all, life insurance helps people fulfill their responsibilities, control their legacy and provide for their loved ones. Maintaining coverage is often an important part of being a financially responsible adult. However, even though people may understand that they need coverage, they might not know which type of life insurance they need. There are many different types of life insurance, and to find the right fit, you need to ask questions.
A Sundae Bar of Options
Imagine going into an ice cream parlor and saying you want some ice cream. You don’t specify the flavor. You don’t say if you want a cup or cone. You don’t mention toppings. The person who works there is going to have to ask a lot of questions to figure out exactly what you want.
Life insurance is similar.
Just as there are different flavors of ice cream, there are different types of life insurance.
- Term life insurance provides coverage for a predetermined period of time, such as a 10, 20 or 30 years. These policies tend to be more affordable.
- Permanent life insurance can cover the rest of the insured’s lifetime. These policies typically build a cash value that can be accessed through loans or withdrawals. There are different types of permanent life insurance, including whole, universal and final expense insurance.
And just as you can add toppings to your ice cream to suit your tastes, you can customize your life insurance coverage with riders that add additional benefits. Common riders include:
- Accelerated death benefit riders that allow the insured to access a portion of the death benefit in the event of a critical or terminal illness.
- Long-term care riders that provide coverage for long-term care costs.
- Child term riders that provide coverage for the insured’s children.
- Waiver of premium riders that waive premiums during periods of disability.
- Term conversion riders that let the policyholder convert a term policy to a permanent policy during a specified timeframe.
Asking Questions to Identify the Right Fit
It’s impossible to say which type of life insurance is best. There are many different varieties because each one serves a different purpose. Which one is the best for an individual will depend on that individual’s needs and preferences.
As an insurance agent, you can ask five questions to help your clients determine the right type of life insurance for their needs.
- What’s your budget for life insurance? Many people are surprised to find out how affordable term life insurance can be. If your client has a limited budget, this might be a good option.
- What do you need the benefit to cover? This question can help you identify an appropriate policy type as well as the benefit amount. For example, someone who wants a life insurance policy to cover medical and burial costs may be happy with a final expense policy with a relatively modest benefit. Someone who wants a policy to cover their children’s care and education may want a term policy with a larger benefit.
- How long do you want to maintain coverage? Sometimes people only need life insurance for a set period of time, such as until their kids are grown or their mortgage is paid off, so a term policy is suitable. However, many people want coverage to last the rest of their life so they know they’re loved ones will receive the benefit eventually. In this case, either a permanent policy or a term policy with a conversion rider makes sense.
- What is your risk tolerance? If a client is interested in a permanent life insurance policy that builds a cash value, it’s important to determine their attitude toward risk and predictability. Universal life insurance policies are structured in a way that provides flexibility, but as a result, the performance can vary, affecting the premiums and benefits. Whole life insurance is more rigid but also more predictable, which some people find reassuring.
- What are your other financial concerns? Your client may have other needs that can be addressed with the right riders. For example, if your client is worried about the financial impact of illness or disability, consider long-term care, accelerated death benefit and waiver of premium riders.
PTT Financial is here to support you. We offer access to life insurance products from top carriers, as well as training and incentives. Learn more about working with PTT Financial.