What’s the value of life insurance advice to the consumer?
Most (normal) people don’t strike up conversations about life insurance. It can be a tricky and awkward topic because it raises the very real possibility of terminal illness, accidents, injury and death.
However, for advisers, it’s an easy topic to broach. Not only because talking about life insurance is what they do but because they understand the importance and value of life insurance and have seen firsthand the difference it makes in people’s lives.
But the benefits aren’t just monetary, although anyone who has had a claim paid or knows someone who has, understands the enormous personal and financial benefits.
The problem is that articulating the tangible and intangible benefits of life insurance and advice to new clients or those rethinking the value they get for the premiums and fees they pay has never been easy.
The list below provides a valuable reminder.
Six benefits of life insurance and advice
1. Peace of mind
A key premise of life insurance advice is peace of mind. Talking through ‘what if’ scenarios may be uncomfortable but facilitating peace of mind for clients is an outcome that’s worth some discomfort. Peace of mind, though intangible, is a highly relatable concept. Life insurance planning helps clients recognise the meaning of their life. It emphasizes what they have and what can be lost. It’s important to link the value of life insurance to a client’s key life values as part of any advice discussion. Making that connection often leads to an ‘a-ha’ moment for many people.
The tricky thing is that some people have a greater need for peace of mind than others.
To gauge a client’s need for peace of mind, advisers need to be perceptive and understand their personality. There are usually other signs too. For example, people who are cautious and display higher degrees of worry and anxiety about their financial future are more readily able to see the value of life insurance
2. Life satisfaction and well-being
The value of life insurance advice goes beyond peace of mind. It also contributes to a client’s well-being and life satisfaction.
This makes intuitive sense given a person who has engaged an adviser generally wants to know where they stand and take greater control of their future. This perception of greater control is known to enhance life satisfaction.
Ironically, life insurance gives clients a sense of control over the uncontrollable, which makes them feel better.
On the flip side, living with financial stress – which is a potential side effect of economic uncertainty and not holding adequate life insurance – often accompanies feelings of shame and low self-esteem.
When looking to buy life insurance, clients want to understand their financial position and risks, and how they can protect themselves and their families.
Not only does an adviser recommend the most appropriate strategy and products based on a client’s personal situation, needs, objectives and budget but they also explain their recommendations.
They educate clients about why they are recommending specific types and levels of cover so they can make smart, informed decisions.
The best outcome is one where clients feel they are getting value for the cover being bought in relation to the risk they face.
4. The right type and level of insurance
Clients who seek advice tend to hold adequate protection because their adviser has assessed their personal needs and objectives; reviewed any existing insurances; and made suitable recommendations taking into account their goals, risk profile and budget.
For the majority of workers who automatically receive a standard amount cover through their superannuation fund, they only have cover for 20-30 per cent of their needs, according to Rice Warner Actuaries.
People are often surprised to learn the shortfall between the cover they have and the cover they need, not to mention the benefits of holding some insurance outside their super fund.
5. The right policy
While there are only 11 or so retail insurers in the market, the full range of products they offer can be overwhelming.
Advisers can add significant value by using their knowledge and experience of which insurers are easy to deal with and quick to pay claims to help clients select the most appropriate solution.
Once a client has decided to purchase life insurance, an adviser will help them complete the application process and prepare them for the risk assessment process.
In some cases, an insurer will request additional information or request a medical assessment.
Once an application has been assessed, an insurer will decide on whether a policy has been accepted and on what the terms. Depending on a client’s health and medical history, policy loadings and exclusions may apply.
For clients who are not completely happy with their policy terms or feel misunderstood, an adviser can liaise with the insurer on their behalf to ensure they fully understand the situation and push for improved terms.
6. Confidence at claim time
Lodging and managing a claim is a key part of the advice process and central to the advice proposition.
A major review by the corporate regulator found that life insurance claims, including TPD, trauma and income protection, are declined least often when an adviser is involved in the process.
This is a critical fact that should reassure clients and reinforce the value of advice.
Clients need to know that their adviser will be there for them if, and when, they need to make a claim.
They should be confident that any claim will be managed with compassion and in a timely way.