As the professional landscape for life insurance agents becomes more competitive year after year, you may be asking yourself — “How do I go above and beyond to help my clients?”. When asking this question, it’s crucial to take into account the main goal of a life insurance policy. The whole reason that individuals decide to invest in life insurance is to provide their loved ones with a financial safeguard for those that depend on them financially in the event of an untimely and natural death. With that being said, no aspect of a life insurance policy is more important than the beneficiary.
Some clients know exactly how they want to structure their policy and who they want to elect as their beneficiary. For others, the decision isn’t always so cut and dry. This scenario presents you with the opportunity to display your knowledge by helping clients make the most informed decisions. By asserting yourself as an expert who wants to guide clients through this complex process, they will in turn be satisfied with your diligence which can open up the doors for lucrative opportunities down the line such as customer renewals and referrals.
Beneficiary Key Considerations
As a life insurance agent you already understand how helpful a life policy’s payout can be in someone’s life. These payouts help to relieve stress and financial strain in a number of ways. This includes helping loved ones pay for things like outstanding debt, funeral costs, living expenses, and much more. The simple fact is, no one wants to have to worry about money after losing a friend or family member. That’s why it’s so important to have these tough conversations well ahead of time. Start by focusing on financial factors, family dynamics, and emotional consideration with your clients.
Financial Considerations
Financial factors are oftentimes the driving forces in choosing a life insurance beneficiary. When evaluating finances with your clients, it’s important to discuss the financial needs of their loved ones, any debts that they have, and estate planning if applicable.
The Financial Needs of Loved Ones
Discussing a client’s family members, the relationship that they hold with each one, and each of their financial situations is extremely necessary. Simply put, the decision for each client varies. With that said, this discussion aims to help you get a better understanding of who would benefit from a payout the most. For example, if the client has young children, it’s likely that their spouse would be their primary beneficiary.
On the other hand, maybe the client’s spouse is retired and already has a large retirement fund at their disposal, but their child who is now grown has a small business and a baby on the way. In this case, the client may be more inclined to list their child as the primary beneficiary. These are just a couple situations that could arise. By asking the right questions you’ll provide clients with valuable insights no matter how unique their situation may be.
Obligations and Debts
If your client or their loved ones have any financial obligations such as outstanding debts or loans, it’s important that this isn’t ignored. If the client themselves has outstanding debt, encourage them to choose a beneficiary who they are confident in to settle it. On the flip side if they elect a beneficiary who isn’t concerned about the debt, the burden could fall onto another family member. If the client has no debt or loans, you should still ask them if any of their close family members do. For example, maybe they have no debt, but their son has $100,000 of student loan debt. This may push the client to consider adding the son as a main beneficiary.
Other Financial Planning
Some of your clients may have complex financial portfolios with a variety of different assets and investments. For these clients, they might want to pick a beneficiary that aligns with their investment or estate planning goals. For example, some people use trusts or other financial setups that effectively manage the distribution of their money and assets. Clients with extensive portfolios may already have a good idea of how they want their money handled. Nonetheless it’s always a good idea to have the discussion.
Family Considerations
Having conversations about family structures and dynamics is crucial when guiding clients to pick the best beneficiary. Here are a few things to keep in mind during your meetings:
- Marital Status: First and foremost, you need to understand the marital status of the client at hand. For married clients the most common practice is placing their spouse as the primary beneficiary. With that said, there are many other unique situations to consider. Ask your clients if they have any ex-spouses, stepchildren, or second families, as these could all impact the beneficiary decision. For example, if the client is happily married but has an ex-wife who takes care of their young children, he may want to split the money between his current and ex-wife, or maybe even make the ex-wife his primary beneficiary.
- Young Children: Briefly touched on above, a big factor in the beneficiary decision-making process is children who are minors. The simplest scenario is for the client to make the other parent the beneficiary. With that said, there are oftentimes other factors that you should bring up. For example, maybe the client is a single parent with children who are minors. In this case, you’d want to discuss any considerations about legal guardianship. Additionally, some clients may show interest in setting up trusts for their children. In these situations its often necessary for clients to seek expert legal advice. Nonetheless, bringing up these factors helps them to consider options that they may not be considering.
Emotional Considerations
While finances and family are the two most important factors, make sure your clients don’t overlook emotional considerations. Here are a couple emotional factors to bring up during client meetings:
- Charity: Some clients, especially those who have devoted part of their life to philanthropy, might consider choosing a charitable organization to be a beneficiary. Help them understand that this allows them to support a cause close to their heart, even after death. At the same time, it’s important that they understand the effect that making an organization a primary beneficiary would have on their loved one’s.
- Gratitude: For other clients, there may be people or groups in their lives who have played a pivotal role who aren’t necessarily family members. Some examples of this could include mentors or institutions that they worked closely with. While less common, you should talk to your clients about anyone who they feel overly gratuitous of.
Other Considerations and Tips
- Tax Considerations: Discussing any beneficiary tax implications is crucial so that loved one’s won’t be negatively affected in any way later down the line. In general, beneficiaries recieving death benefits, won’t be subject to taxes on the benefit. Keeping this in mind, there are some specific situations when this rule doesn’t apply. The first is if the policyholder decides to delay the payout. In this case, the money goes to the insurance company for holding. In this case, the beneficiary may have to pay taxes on the interest generated when they receive the money. The second scenario is if the client names an estate as their beneficiary rather than an individual. In this situation, whoever inherits the estate may have to pay estate taxes. While these situations aren’t as common, it’s wise to lay that information out for clients, as it could have a potential impact on their choice.
- Encourage Regular Policy Reviews: While life insurance policies don’t usually need to be renewed on yearly basis, you should encourage your clients to meet with you annually. These meetings ensure that policies are always up-to-date, that the proper legal documentation is in place. This way you’re aware if there have been any significant life changes to the client. Regular reviews ensure your clients that everything is order. In turn, they’ll be able to go on with their lives and not have to worry.
Final Thoughts
While choosing a beneficiary for a life insurance policy can seem like a daunting task for your clients. Even so, it’s your job to guide them through the process making it smooth and easy. There’s truly a lot to take into consideration. When you boil it down to finances, family, emotional loyalty, and taxes, it seems much more manageable. By taking sufficient time to guide your clients through this journey, they will be happy knowing that their loved one’s futures are secured. Additionally, by paying close attention to each individual’s situation and looking at even the smallest details, clients won’t likely have to worry about making big policy changes going forward. Even though the most ideal beneficiary for each person is different, by practicing open communication and effective preparation, gives clients peace of mind.
As an insurance agent, providing exceptional customer service is only half the battle. The other half is finding interested consumers to have conversations with. Luckily for you, we’ve got everything necessary to help you reach more people and shake more hands. At Benepath we’ve been specializing in insurance lead generation for over 15 years. We help agents of all types get connected with qualified consumers who need help finding the right insurance policies. On top of that, all of our leads are exclusive and produced in real-time. This gives you the best chance to maximize your sales. We offer both data leads and inbound phone calls in the following verticals: Individual health, group health, Medicare, life and commercial insurance. So, what are you waiting for? Fill out a form or give us a call today at 888-684-3121.
