News from a recent industry report might surprise advisors working hard to ensure Canadians have the right protection in place. Three out of 10 Canadians have no life insurance at all.1 And many of the Canadian households that do have life insurance, don’t have enough (45%, up from 38% in 2006).2
At the same time, more than 75 per cent of adults live with at least one source of considerable stress, and not surprisingly, money is the number one stressor.3 Having a life insurance policy with the right amount of coverage can offer some peace of mind. Clients, especially the main breadwinners, would know their loved ones would be able to cover basic expenses, continue to contribute to savings and education plans, and support their standard of living.
Then why are so many Canadians underinsured? You’ve probably heard several reasons:
- Adding insurance to a financial plan is a low priority.
- It’s too expensive.
- Talking about dying is unpleasant.
- The options are too confusing.
- Procrastination: There’s always tomorrow.
- I have group coverage at work.4
You might think providing for family members after an unexpected death would be a top priority; however, it ranks only eighth among financial concerns.5
Truth and consequences
How can you help your clients and prospects understand the seriousness of not having enough life insurance? Using a case study to demonstrate the financial consequences of an unexpected death can lead to rational discussions and prevent clients from becoming overly sensitive and abandoning this weighty yet essential topic.
Many Canadian households admit they couldn’t pay for basic essentials if the primary income earner were to die. If they were to lose that income, almost two-thirds acknowledge they’d have trouble paying for everyday living expenses right away or within a few months.6
Consider asking your clients, “What would happen to you if the main income in your family disappeared? Would you be able to cover expenses, debts, and taxes?”
You could also ask clients about their retirement. Almost one out of four (24%) Canadian pre-retirees don’t have confidence that they’ll have a comfortable lifestyle in retirement.7 The loss of the major income in a family would severely cut into the ability to continue saving for retirement and eventually affect the total retirement income available. Less than one in five Canadians has a written financial plan.8 A good place to start a conversation is to talk about putting a plan in place. This discussion could lead to you explaining the importance of having a life insurance policy in that plan.
You can help Canadians looking for help
“There are so many advantages to owning a life insurance policy. It’s affordable protection that provides peace of mind. The death benefit is paid tax-free to clients’ beneficiaries. And there’s a type of policy – whether it’s term, permanent, or participating – that can meet a client’s needs and budget,” says Paul Fryer, Vice-President of Individual Business Management at Sun Life Financial.
A huge opportunity exists for you to fill in the life insurance gap: six million Canadian households believe they need more life insurance.9 It’s a need you can meet by showing how much is enough. Start with your client management system to discover who’s underinsured, and set up a meeting to show them the consequences of having too little life insurance and – more importantly – the solutions.
Younger people in a key retirement planning market are likely willing to discuss life insurance with you, face-to-face. Seven out of 10 adults under age 45 prefer to meet with someone in person when buying life insurance.10
You can help clients who are anxious or wary about life insurance by explaining, in plain language, the options available. Show them which products best satisfy their needs, which company has the best solutions for them, the amounts they should consider, and how life insurance fits into their overall plan.
With so many Canadians underinsured or not having any life insurance at all, your task to educate and encourage action is even more important now than it was 30 years ago. You have the knowledge, the solutions, the tools, and the opportunity to help shield your clients from the serious financial difficulties often accompanying a death in the family.
If you know clients or prospects who want to do some research about life insurance before they talk to you, they could learn more from the following educational material:
- Life insurance – What is it?
- Permanent life insurance – simply put (video)
- How much life insurance do you need?
- How much do I need? (calculator)
1 Canadians at Financial Risk, 2013 Canadian Life Insurance Ownership Study Highlights, LIMRA, p. 1.
2 LIMRA, p. 6.
3 2013 Sun Life Canadian Health Index™.
4 LIMRA, p. 5, 7.
5 LIMRA, p. 3.
6 LIMRA, p. 6.
7 Pre-retirees defined as working, aged 50-65, with at least $50,000 in investible assets; LIMRA, p. 3.
8 2013 Sun Life Canadian Unretirement™ Index.
9 LIMRA, p. 6.
10 LIMRA, p. 9.