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How to Pinpoint Clients Who Have the Most Immediate Need for Life Insurance

clients who need life insurance

When it comes to securing a financial legacy, life insurance can be an integral component. However, some people have a more urgent need for life insurance than others.

The trick for wealth advisors is determining those individuals with the most pressing need so that you can provide optimal guidance and protection for their financial futures.

Here are three groups, in particular, who you may not think of initially, but who can greatly benefit from life insurance coverage.

Families with Special Needs Members

More than 50 million Americans cope with special needs and the related, increasing expenses involved with medical care. It takes a tremendous amount of time, money, and emotional capital on a daily basis to provide care for a special needs family member, and long-term planning is essential, as well.

For caregivers, protecting a special needs child or individual may require certain planning intricacies that could have devastating financial results if not followed precisely.

Medical expenses, alone, can easily skyrocket from month to month when raising a special needs child. Caregivers should consider who will pay for these bills should they die prematurely.

Purchasing life insurance and naming a special needs trust as the beneficiary can provide critical protection and financial support throughout a special needs child’s lifetime.  

Using life insurance to fund a trust is incredibly cost-effective and typically protected from creditors. This strategy can also:

  • Safeguard a special needs individual’s eligibility for government assistance such as Medicaid and Social Security.
  • Allow caregivers to easily allocate proceeds to special needs care and other family members.
  • Provide an income and estate tax-free death benefit when properly prepared.
  • Offers reassurance that a special needs individual will be cared for in the event of a caregiver’s passing.

A special needs trust should also be named as the heir to an estate in a caregiver’s will, to similarly prevent the special needs individual from being disqualified for government benefits.

When choosing a trustee to manage these funds on behalf of the special needs individual, caregivers will want to choose a person who is not only financially savvy, but one who also shares his or her values and demonstrates a strong advocacy for the special needs individual. The trustee has a lot of responsibility, however, and it’s important to note that this responsibility does not have to fall on one person. The trustee can be a combination of an individual and a corporate trustee.

Ultimately, special needs trusts can help to support the disabled individual for an extended period of time, relieving siblings and other close family members of financial drain.

Creating a special needs trust can be a complex endeavor, however, and seeking advice from a consultant specializing in such cases is strongly advised.

Blended Families

Statistically speaking, approximately half of all first marriages end in divorce, making blended families more and more common with each passing year.

Although the Brady Bunch never got into the weeds regarding “who gets what” – or at least did so off-screen (or left everything to Alice, or Tiger) – there will come a time in a normal blended family’s relationship when estate planning needs to be confronted.

And it can get stressful. If precautions are not taken, the lion’s share of assets may go to a surviving spouse, leaving the children of the deceased in the lurch. The opposite can also be true.

Life insurance can provide a sense of equilibrium and prevent family members from coming to blows over money.

One possible solution is for a husband or wife to take out a life insurance policy and name the children from the previous marriage as beneficiaries. A home from the previous marriage and any other assets could then go to the children from the new union. If necessary, a life insurance trust would keep the funds out of the estate, so the federal estate tax ($11.4 million in 2019 and $11.58 in 2020) is not triggered.

In addition to estate planning needs, life insurance policies can also aid blended families in upholding ongoing child support, satisfying debts, and much more.

Unmarried Couples

According to the U.S. Census, cohabitation is up, and marriage is down nationwide – with approximately 9% of all couples ages 18-24 living together, compared to 7% in the same age bracket who are married.

Such arrangements can make it all too easy to avoid many of the tougher relationship questions, such as “what happens if one of us dies?”

For couples who share financial obligations, such as accumulated debt, ownership of a home or business, or a child, life insurance can provide critical financial protection in the event of an untimely death.

It is important to note that unmarried couples must demonstrate insurable interest in order to obtain coverage with most providers. Insurable interest establishes a distinct financial connection between two parties – and the detriment to that connection should one person pass away.

The good news is that young, unmarried couples will likely qualify for lower rates and can lock in a coveted premium. This allows them to more effectively plan for the future and keep costs at a minimum when those marriage bells begin to ring and building a family is in the cards.

Insurance partners exist who can help you and your client navigate the intricacies of life insurance. Most importantly, individuals who are urgently in need of coverage are seeking reputable advisors who place the family above their own personal gain.

Belman Klein offers more than 50 years of cumulative insurance experience. Our point-of-sale assistance takes the pain out of insurance matters, while our concierge services provide comprehensive answers to your most pressing questions, from locating carriers to estimating costs and beyond. We can help you with any of your back-office needs and can insure against any risks that threaten your clients’ assets. Give us a call at 800-729-6007 today to learn more or register today to become a partner.