Life insurance—you can’t live with it and certainly can’t live without it.
Many people put off thinking about (and selecting) a life insurance policy both because of the nature of the policy and the uncertainties that circle it. How much coverage should you get? Is term or whole coverage more appropriate for your needs? Where should you purchase it from? How much should it all cost?
Obtaining the right life insurance policy for you takes careful consideration and due diligence but it’s a necessary component of a healthy risk management strategy.
How can you find the right policy? Let’s turn to a recent client case study for some answers.
Assess your needs
Before you start the process, it’s critical to determine your needs. Think through the following ideas.
- How much insurance do you need to protect your income?
- Determine the number of dependents you have and the length of time they’ll need to replace your income (education, mortgage, debts, etc.).
- What are your family’s goals and needs for the future?
Let’s look at a recent client example to bring these ideas to life. Before we dive in, note that all personal details have been altered to protect the client’s identity. For this example, we will refer to the client as Bob.
Bob is a high-level executive with a Fortune 500 firm. He is married and has two middle-school-aged sons who will be college-bound in a few short years.
After working with Bob to determine his family’s unique goals and needs, we agreed that a 3 million dollar policy would be most appropriate to protect his income over the next 20 years. Before signing on as a client, Bob thoughtfully purchased a $2.5 million group term policy through work.
In many cases, group life insurance is an efficient and convenient alternative to no life insurance at all. However, in Bob’s case, as with many professionals, the risk simply outweighs the reward. Remaining with one firm for your entire career is unlikely, which could lead to significant gaps in your coverage.
But life insurance isn’t always as simple as knowing the amount of coverage you want and shopping for an appropriate policy. There can be many hurdles along the way that interferes with your ability to obtain coverage like minor (or major) health issues—an area that concerned Bob.
Coordination is key
Given the complexity of Bob’s needs, we turned to our trusted broker for life and disability insurance. As a fiduciary, Columbus Street doesn’t sell life insurance (or any product) and maintains a non-financial relationship with Rich Connolly of Ward & Connolly.
Rich and his team specialize in working closely with financial planners to ensure clients obtain the right coverage at a competitive price. We find it essential to cultivate trusted professional relationships that give our clients the best (and more seamless) experience possible.
After completing a health questionnaire, Rich knew that there would be a significant range of policies and premiums based on Bob’s health.
Rich’s task wasn’t simple: shop around for a carrier willing to understand the nuances of Bob’s health situation, which on paper may have appeared riskier than in reality. His research led to two companies, A and B. After applying, company B proved to be the more lucrative option.
Why Company B?
Several factors influence your life insurance quote like your age, gender, family health history, lifestyle habits, occupation, and more. After assessing these circumstances, a life insurance company will determine which class of insurance you qualify for—a direct correlation to the cost of your premiums. With term coverage, there are four classes.
- Preferred plus
- Standard Plus
The preferred plus category is considered the “best” and comes with the lowest premiums, whereas the standard class carries the highest premiums. You move through these classes depending on your risk factors like a history of disease or lifestyle habits like smoking.
Initially, Company B offered Bob coverage at the standard rating, putting his premium at about $5,000 annually. After several conversations and research, Ward & Connolly negotiated and secured Bob’s coverage at the preferred rate, lowering his premium to $3,000!
Bob’s policy also has a conversion feature, which allows the policyholder to convert their term policy to permanent life insurance. Why would this feature be helpful? Say Bob is 18 years into his 20-year team policy and receives a terminal diagnosis. He can convert his term policy into a permanent one without any evidence of insurability. While the premiums will increase, in this case, it’s almost certainly a tradeoff worth making.
Our professional recommendations
We generally recommend 20‐year term life coverage to our clients. Ideally, we assume that our clients’ needs for life insurance will gradually reduce over time. Of course, as with any plan, there can be financial setbacks, divorce, or other outlier events that modify this assumption.
Life changes, and sometimes that means your needs change right along with it. We seek to accommodate those shifts and ensure our clients have the protection they need both in the short-term and for all the “what-ifs” down the road.
We only partner with professionals that give our clients the best experience. We’ve seen first-hand the deft skills that Ward & Connolly brings to the table. Their combination of experience and willingness to negotiate on behalf of clients demonstrates the exceptional service we expect from a trusted partner.
We’re passionate about working with clients to help them protect their assets and secure their financial future. Is it time to take another look at your life insurance policy? Let’s do it together. Schedule a call with us today.