For advisors who work with clients already in retirement, it can be challenging to know exactly what kind of advice to provide seniors when it comes to life insurance.
Some of your clients may have entered retirement under-insured and are now wondering whether the premiums on a new policy would be cost-prohibitive. Others may find themselves over-insured, now that their children are grown and taking financial responsibility for their own families, and trying to figure out what their options might be at this point.
It’s important to address some of the basic principles with respect to seniors and life insurance so that professional advisors can provide each individual client with the most appropriate advice.
Here are four guidelines for your clients to consider:
1. Term coverage doesn’t have to be expensive.
For clients who feel they need more life insurance, they may be able to obtain good term life coverage for a lot less money than they might have assumed. If your clients are younger retirees in reasonable health, they can likely buy 10-or 20-year term coverage without breaking the bank.
2. Avoid the overbuying trap
Unless you have a client who is struggling to manage an estate planning dilemma, it’s highly likely that your senior client needs less coverage than they did when they took a look at their financial plan years ago. The fact is that our financial obligations tend to decline quite a bit as we age and as our heirs build their own independent lives.
3. Know when to say when.
Of course, for many of your clients, it just won’t make sense to purchase life insurance in their senior years. For example, your client probably ought to avoid taking on new life insurance premiums if they have sufficient savings set aside for their spouse or other dependents, no longer have any financial obligations of significance and already made financial arrangements for their funeral expenses. The potential exception might be if they do not have long-term care insurance, in which case it might be wise to explore some of the private funding options recommended by the National Association of Insurance Commissioners, which includes certain life insurance products.