4 Ways to Help Your Clients Make Informed Decisions
Many shoppers have experienced buyer’s remorse: That pastry wasn’t as good as you dreamed. Or the luxury shoes you bought wore out after just one season. Maybe you wish you had signed a lease in a different neighborhood.
As an insurance agent, you want to ensure that your clients don’t have buyer’s remorse, especially since a life insurance purchase lasts years. Ensuring that your clients make informed decisions is the best way to prevent buyer’s remorse.
Understand their situation
Your goal is to make a sale, and you need to do right by your clients. Start by becoming familiar with their financial situation, monthly budget, life goals, and coverage needs. Understanding this information will help you make thoughtful, personalized recommendations.
Your client’s coverage needs may exceed what they can afford. Remember, a life insurance policy is like a marathon — your clients need to be able to maintain the monthly premium payments or they’ll lose their coverage. Even if it’s not the full coverage they may need, some coverage is better than no coverage. Recommend that your client start setting aside funds in their savings that they can use to cover premiums if they lose their regular income.
Explain the basics
Life insurance is intimidating, and the details of a policy make a big difference. Make sure that your clients understand life insurance basics.
Explain terms like death benefit, premium, lapse, rider, cash value, and underwriting. These terms are familiar to anyone dealing with life insurance, but your clients may not understand them or be comfortable using them. If your clients don’t understand basic terminology, they cannot make an informed decision.
You also need to make sure that the roles of the policyholder, insured person, and beneficiary are clear: The policyholder is responsible for making premium payments. The insured person passes through underwriting. When the insured dies, the beneficiaries receive the death benefit.
Policyholders can also be the insured or they can purchase a policy on someone else’s life and name themselves as the beneficiary. Policyholders can name people, institutions, nonprofits, or charities as beneficiaries of their policy. It may seem straightforward, but it’s an interconnected, and sometimes tangled, web of interaction.
Discuss the pros and cons
As you help clients evaluate their options, be forthright about the pros and cons. Term life insurance is significantly cheaper than permanent life insurance, but it only lasts a set number of years. Does your client mostly need coverage for debt?
Whole life insurance has guaranteed cash value growth and lasts a lifetime. It’s also the most expensive. Could your client maintain the payments over the course of their life?
Universal life insurance is usually cheaper than whole life insurance, but your clients assume more risk with the cash value and the premium rates can change.
You understand the basic pros and cons of every aspect of a life policy. Go the extra mile to apply these pros and cons to your client’s situation. In some circumstances, the downsides of a policy may not matter as much. In others, they can make a big difference. Be honest when you explain why the term length may not be as much of a concern for your client or why it is.
Don’t forget to review the pros and cons of various riders. Will these riders actually help your client?
Highlight policy specifics, nuances, and definitions
Beyond the basic pros and cons of policies and riders, be sure to review any stipulations or definitions included in a policy or rider. Doing so ensures that your clients avoid running into unexpected surprises when they use their policy.
For example, terminal, chronic, and critical illness riders often have specific definitions of what a qualifying diagnosis is for the rider to be used. Clarifying these definitions for your clients will help them know what to expect.
Focusing on your client’s needs and constraints will help you make tailored recommendations. Helping your client understand life insurance basics and the advantages and disadvantages of different policies applied to their situation will make it easier for your clients to evaluate their options. Highlighting specific policy stipulations will help your client avoid surprises when they use their policy. Focusing on these four strategies will allow you to meet client needs and establish a trustworthy reputation as a life insurance agent.
Alice Stevens has managed the health and life insurance content for Best Company since 2018. She’s passionate about conducting good research and understanding the details everyone needs to know about insurance. When she’s not writing and researching, she enjoys good food and travel.
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