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    When Serving the Life Insurance Needs of High Net Worth Clients, It Never Hurts to Ask

    May 22, 2018

When Serving the Life Insurance Needs of High Net Worth Clients, It Never Hurts to Ask

By Matthew Paine

It’s no surprise that the clients who need the most life insurance are the ones who have the most assets but, often, these can be the clients who don’t have enough life insurance to pay for their highly complex needs.

The reason they are underinsured? For 71 percent of high net worth individuals surveyed by The Phoenix Companies, it was because no one asked them to buy more life insurance even though they may have needed it and been interested in buying. Yes, some of the most sought-after clients in the wealth management business are under-served by insurance agents and advisors who assume their wealth ensures they have what they need to live comfortably and pass on a large estate to their heirs.

In fact, insurance agents and advisors may be missing one of the strongest opportunities in their own practices.

Starting the life insurance conversation with these clients should be an integral part of an analysis of their financial needs that can take place at least once a year or when life circumstances change. Recent changes in the tax laws are just one of the reasons it should be an essential topic for any high net worth client.

Here are five life insurance topics you can use to start the conversation with high net worth clients about their insurance needs:

  1. Business insurance: According to S. Trust, as many as 70 percent of high net worth individuals are business owners who have a need to mitigate risk for themselves and their businesses. That opens an entire class of issues and the life insurance solutions to solve them that can include key person insurance and other products that protect their businesses.
  2. Changes in the estate tax: With the estate tax exemption rising to $11 million, the heirs of clients with potentially big estates will owe less of an inheritance in taxes. This means that some clients may need less insurance to pay for heirs’ costs or they could need other types of coverage. As important, the new exemption is not permanent; it sunsets in 2026 when it goes back to $5 million. That raises another insurance possibility to be considered if there is a chance their heirs will be saddled with a 40 percent tax on any assets over the $5 million the estate tax could go back to if Congress fails to act.
  3. Illiquid investments: Many clients in this category hold assets that can be difficult to sell at full value or may be a valuable asset – like a piece of art or a classic car – that holds more value to some heirs than others. Structured properly, insurance can enable one heir to hold onto the asset instead of having to sell it to make whole another heir who doesn’t want it.
  4. Leveraging assets: Single premium life insurance can be a good strategy for high net worth individuals with cash to employ. When it is purchased, it produces a certain death benefit that enhances the value of the estate without need for management.
  5. Charitable giving: Life insurance can enable a high net worth individual to continue contributing to a favorite cause while retaining benefits that can be passed on to their heirs.

Use any of these topics as a conversation starter and you may find a great chance to be a trusted source for an important client. As the survey showed, it doesn’t hurt to ask.