The Four L’s Of Life

by Eloise Glaspie, CLU, ChFC Life Sales Consultant

Designated in an effort to raise awareness among consumers and producers about the need for life insurance, this September marks the eighth anniversary of Life Insurance Awareness Month.  LIMRA’s 2010 Life Insurance Ownership Study revealed that 30% of American households have no life insurance coverage, and more than half (58 million) are underinsured, leaving them vulnerable in the event of an accident or unexpected death. Now more than ever, it is vital that consumers protect their financial security. Life insurance has been providing this kind of protection to Americans for more than 200 years through the efforts of insurance professionals like you. 

Why do people purchase life insurance? Sometimes it is mandated by divorce or other legal proceedings. However, as a general rule, life insurance is bought out of “Love” for someone; desired maintenance of a specific “Lifestyle” for those left behind at death; as a “Leverage” play to increase asset values for today or future inheritance; and, finally, to provide a “Legacy” to heirs or charitable institutions upon death of the insured. The majority of sales will be made for more than one of these Ls. 

Most households include one person who is the primary wage earner. If that person were to experience an untimely death, tax-free life insurance proceeds could be invested with the earnings used to replace lost income. In that same household, you may find a stay-at-home spouse who is serving as the caregiver for minor children and providing general domestic services to the family. In both instances, a life insurance policy on one spouse with the other as beneficiary will secure the family’s future. For the many families raising special needs children, life insurance could help alleviate concerns about future care for these children after the caretakers have passed away. It’s not uncommon for today’s family dynamic to include an elderly parent or relative who is dependent on caregivers for financial and/or health care support. These situations all lend themselves to Love and Lifestyle sales. 

Funeral, legal and administrative costs associated with death are promptly paid with life insurance proceeds. For some survivors, state and/or federal estate taxes may be owed depending on the amount of assets owned by the deceased. Life insurance proceeds allow loved ones to focus on their grief by helping to pay for these expenses. These needs would fall into the Love and Legacy categories.  

Cash value life insurance policies can be used to provide tax-free income during life as a supplement to a pension or to provide future survivor income, thus allowing the pensioner to elect the sole life option which offers a higher payout. Using this pension maximization approach to retirement planning for your clients, you can allow them to select beneficiary(s) to receive any unused funds at the deaths of both husband and wife, thereby benefitting those they care about most. The traditional pension does not offer that option. We could assess three Ls to this planning:  Love, Lifestyle and Legacy. 

Many of your clients are required by IRS regulation to take required minimum distributions (RMDs) from their IRAs at age 70 ½. Or, they may receive interest income from other financial instruments that they don’t need for daily maintenance. By using these distributions to fund a life insurance policy on themselves, they are able to increase their heirs’ inheritance dramatically through the income tax-free death benefit. Our Ls associated with this strategy are Love, Legacy and potentially Lifestyle for those left behind.

Business owners have special needs that life insurance can protect. For example, life insurance is a great source of funding to stabilize a business at the death of a key employee or owner, collateralize a business loan, or fund a buy-sell agreement. Cash value policies can be used to establish a fund for retaining key employees (stay bonus, SERP, deferred compensation, etc.). Sometimes they can be used to equalize inheritances between business heirs and non-business heirs. Again, we can point to three of the Ls in business planning topics: Lifestyle, Leverage and Legacy.

If your client has been a regular contributor to a charity or church, life insurance can be a valuable tool for leaving a perpetual legacy after the donor has passed away. If assets are left by will to charity, insurance can be used for Legacy planning to replace the wealth in the estate for the heirs. 

Life insurance is all about making certain that the life your clients have worked so hard to build for their loved ones won’t come to a halt if something were to happen to the client prematurely. The best way to ensure that your clients have death benefit protection when it’s needed most is to meet with them now and encourage them to buy before the unthinkable happens. As you visit with clients both old and new, remember to listen for the four Ls that will Lead you to your next Life insurance sale. Call your Life Sales Consultant for support along the way.

FOR AGENT USE ONLY. NOT FOR USE WITH THE GENERAL PUBLIC. 11869 – 2011/8/18