According to LIMRA’s 2016 Life Insurance Ownership Study, financial advisers should consider offering clients an annual review of life insurance needs and strategies.
While the actual sale and service of life insurance may not seem appealing or practical to some advisers, they can still play an important role. Some 40% of investors say they are fundamentally interested in life insurance products—and many are interested in speaking with wealth advisers about how to use them properly.
Based on LIMRA’s Life Insurance Needs Model, 48% of U.S. households have a life insurance coverage gap below what is considered optimal—$200,000 on average.
“Among households with children under 18, four in 10 say they would be in immediate financial trouble if a primary wage earner died today,” the research explains. “Another three in 10 would have trouble keeping up with basic living expenses after several months. But across all ages under 65, the income replacement rate (number of years covered) has declined since 2010.”
Against this backdrop the role for advisers to play is clear, LIMRA suggests.
“This is an opportunity for financial professionals to reach out to their clients and engage with new prospects,” researchers suggest. “LIMRA’s research shows that the majority of households (56%) said they were more likely to buy when advised by a trusted financial professional. And more than one-third (35%) of married couples with dependent children want to speak with a financial professional about their life insurance needs.”
The data shows six in 10 say they don’t know what to buy or how much they need; one of the biggest obstacles to purchasing is a lack of information.
“More than a third of U.S. households who believe they need more life insurance say they haven’t purchased because they haven’t been approached by a financial professional,” LIMRA finds.
There is also the impending Department of Labor (DOL) fiduciary rule reform to consider, which could impact the balance of assets directed to annuities, life insurance and other investment product silos. In addition, observers have suggested the nature of the new fiduciary rule could create an environment in which more holistic wealth planning is promoted, potentially giving a boost to life insurance sales.
The full LIMRA analysis is available here.