Buying insurance early is better

Comprehensive financial planning is particularly important now. Global markets are still unstable and many countries have a rapidly aging population.The number of retirees in North America is high and continues to grow. Retirement planning is crucial, not just for clients reaching age 65, but also for younger clients.

Put on your parachute

Whether clients are approaching retirement and are cognizant of the realities of aging, or are young professionals just beginning to save for the future, life insurance is a crucial part of a comprehensive plan. More people are starting to understand the benefits of life insurance and see it as more of a necessity than a luxury.

To maximize the impact of the product, they need to insure themselves and their family while everyone is in good health. A simple metaphor is often effective to help clients understand this—you can’t put on your parachute after you’ve already jumped out of the plane.

The same applies to life insurance. After health has deteriorated, it’s too late to protect yourself. While it is not impossible to become insured after a major health event, options disappear and the full benefits of the product will likely no longer be available.

As a client ages, rates tend to increase. The same applies after the client finds himself in bad health. In both cases, the probability of sufficient protection at a manageable price decreases. In addition, insurability itself will become more difficult as a client gets older and the chances of illness are higher.

Long-term care for the long haul While the benefits of life insurance are becoming more apparent, many consumers still do not value health insurance equally. During discussions about insurance, the same principles used to demonstrate the need for life insurance can be used when recommending both critical illness and long-term care insurance.

Clients need to act pre-emptively because the best level of protection can only be attained in good health. Many young people still consider retirement planning as an afterthought because it’s far in the future. The idea of being unable to work due to an unforeseen debilitating illness is nearly unfathomable.

Similarly, it’s difficult to accept the idea that one day, they will no longer be able to care for themselves and will require daily care, which can quickly deplete a client’s savings.

The addition of these two products can help guarantee income throughout retirement, assist in paying for medical care and also reduce the financial impact poor health can have on close family members.

Without pre-emptive planning and proper levels of protection, clients put themselves in a dangerous financial situation. The level of care needed will increase in price if they have not planned early, as age and health become greater factors in insurability. Young clients have the greatest opportunity to have a plan within their price range and with the highest level of security.

Shield investments from the market

Beyond traditional insurance products, advisors should also encourage their clients to consider adding insured investments to their portfolio. Unfortunately, advisors often shy away from recommending investments such as segregated funds and accumulation annuities to their clients due to additional fees.

While it is true these products incur more service costs, the client is insuring their investment and therefore putting more protections in place.

Although many people see the stock market as a way to make money on their investments, given the financial roller coaster experienced over the past few years, the market isn’t performing how clients expect.

Advise them to not only focus on growing their investments and building interest, but preserving their estate as well. Insured investments will help protect their money from market fluctuations.

It’s not unusual to encounter clients who feel as though they are already over-insured. When economies are underperforming, clients may look to cut unnecessary expenses. Since insurance is not something that fulfills its potential immediately, clients often see it as expendable.

The key to helping clients understand the true need for insurance is reminding them of not only how quickly health can deteriorate, but how quickly the economy can deteriorate as well.

Of course, no one could have predicted the discouraging turn taken by the current global market, so ask your client or prospect, “What will the economy look like when it is time for you to retire?” The economy could be booming, but don’t take that chance.

Paula MacMillan, BA is a Winnipeg based financial advisor with 10 years of experience. She has been a Million Dollar Round Table (MDRT) member for six years, and has served as a guest speaker at MDRT and Advocis chapter meetings over the course of her career.