Steering clients back on track when they have second thoughts
With today’s high inflation, high interest rates, and other financial pressures, many people find themselves underinsured, or choosing to reduce or cancel their life and health insurance coverage. As a financial advisor, it’s your challenge to help them navigate these pressures without making a decision that could have disastrous financial consequences.
What’s getting in the way?
When a client refuses an insurance proposal, or asks to reduce or cancel their existing coverage, it’s time for a conversation. You want to understand what’s getting in the way of accepting or maintaining their coverage so you can address their concerns and provide a different perspective.
Here are three of the top reasons why clients avoid insurance coverage and how to gently persuade them to reconsider:
1. Missing the forest for the trees. When clients start thinking about ways to trim their budget, it’s easy to place value on the tangible things they spend money on, like housing, transportation, groceries, clothing, and even vacations. But because insurance coverage is intangible, it can be harder to see all the value it provides. The only thing the client sees is a monthly premium being withdrawn from their bank account - and that makes it tempting to cut it from their budget.
2. False sense of security. You’ve probably heard a client say something like, “I’m not planning to die any time soon,” or, “I have no intention of getting sick.” While it may be hard to imagine these things happening to us, wishful thinking cannot change the fact that everybody dies eventually, and many of us will become injured or ill before we reach the end of the road.
3. Change of circumstances. Sometimes clients will want to drop their insurance coverage as a direct or indirect result of something else that’s happening in their life. Often, this is a stressful event, such as losing their job and panicking about money, or going through the confusion and chaos that can accompany a marital breakdown.
Whatever a client might be dealing with, the most prudent response is always something along the lines of, “Yes, I hear your concerns. Let’s update your insurance needs assessment together so we can understand your options and you can make the best decision.”
For those who are fixated on trimming their budget, an insurance needs assessment will help them review and remember all the specific household expenses and family needs that are being insured by their life and health policies.
For those who feel like they might live forever, the assessment will help them picture all the real financial consequences that could arise if that big “what if?” scenario ever comes true.
For those who are undergoing life changes, it will help them get back in touch with what they’re protecting - whether it’s their ability to seek a new job without having to worry about what would happen if they got sick, or continuing to protect their children even as they adjust to a new family dynamic.
Through this process, you may run up against real barriers. A client’s budget may simply not be what it used to be, or their insurance need may be less than it was before. If this is the case, great - you can discuss options like reducing their coverage amounts, perhaps strategically removing riders, or looking for other ways to juggle their budget. They can calmly consider their options, and you can feel good about saving them from making an impulsive or misguided decision that they might regret later.
Two important points before cancelling
When it comes to cancelling a policy, there are two points that every client should understand:
The first point is that you will not be able to replace your coverage for the same price in the future. Insurance costs go up as we age. The price you have today is almost definitely the best price you will ever be offered.
The second point is that, if you cancel your insurance now, your health could change before you have a chance to replace the coverage. This could make the next policy even more expensive or difficult to obtain. And it’s not just the possibility of something serious like cancer or heart disease. Imagine a client who cancels their policy due to financial stress, sees a doctor about their anxiety, then has anxiety show up as a health concern in their future underwriting. Never underestimate the value of coverage that you already have safely in place.
As a financial advisor, you have a duty to help your clients manage their current money realities as well as their long-term financial well-being. It can be a difficult balancing act. We believe the right approach is to listen to their concerns, use the insurance needs assessment to create clarity and dialogue, and rely on Beneva for insurance and investing solutions that fit.