When looking at a long-term financial plan, there are many things that people have to take into account. There are investments, house mortgages, wills and more that need to be kept track of, but one area that may be neglected in financial planning is term life insurance. A recent survey by Saybrus Partners shows that 56 percent of financial advisers don't even regularly ask clients about life insurance, meaning individuals may have to do their own research on the benefits of life insurance for them and their family.
The poll, taken at the 2012 Financial Advisor Retirement Symposium in Florida, also shows that 34 percent of advisers said they were "very comfortable in chatting about and recommending life insurance to employees." On the other side, 18 percent said they were uncomfortable or very uncomfortable with discussing life insurance.
"Our experience has shown that clients are looking to their financial advisors for comprehensive financial planning. Standard practice is that the planning process should begin with a foundation of protection and conclude with a wealth distribution phase," said Kevin Kimbrough, national sales manager for Saybrus Partners. "Therefore, it is critical for advisors to consistently include life insurance in their clients' financial plans."
Even when people do have life insurance, only 47 percent of the advisers said they regularly review life insurance with their clients and 20 percent said they only assess how the life insurance is performing when a major life change happens. This could have bad results if there is a sudden death or medical problem, as the death benefit and circumstances of the coverage may change as the years go on.
Life insurance is definitely a topic that should come up when discussing the financial plan for the future. AXA Equitable said each individual needs to dictate how much insurance they need for their family and what kind of protection they need.
"Life insurance, payable when you die, can provide a surviving spouse, children and other dependents the funds necessary to help maintain their standards of living, can help repay debt and can help fund education tuition costs," the financial planning company said. "The amount you need depends on your situation. If you make $100,000 a year, have a sizable mortgage, and two kids headed to a good (read: expensive) college, you could need as much as $1 million in coverage."
AXA said that for many families, a combination of whole and term life insurance can be a good way to make sure the future is provided for. It's important for policyholders to review their situation and policy at least annually to make sure any important changes that may be needed are taken care of.
Financial Highway said when looking at how much life insurance is needed, people should see all of their debt costs, plus funeral costs, and add it to six months of after-tax income. This should give the general amount of life insurance each person needs.