Having sold life insurance policies for over twenty years, I am very sensitive to people’s aversion to discussing anything having to do with death. It’s not an easy subject for some people to confront and it makes selling life insurance a very delicate proposition. I find it difficult to use the emotional sales approach many of my colleagues find so effective. I take a more analytical “income replacement”approach, which seems to make the discussion more palatable for some.
I usually start off by discussing homeowner’s insurance and auto insurance, two policy types many folks own and how they compare to life insurance. With both of these policies, there will be a replacement of the destroyed (deceased?) item. If your car or home is damaged beyond repair, you will receive a replacement of the damaged item. Unfortunately, unless actual science catches up with science fiction, a life insurance policy won’t be able to replace a deceased person.
I’m sorry if my tongue-in-cheek analogy offends any of my readers, but I often use it when speaking to life insurance prospects who don’t see the need for life insurance. I use the replacement analogy to lead up to a discussion of what, actually, needs to be replaced – the breadwinner’s income. It’s the same approach I use when I’m discussing Disability Insurance with a prospective client – income replacement.
In discussing the need for disability insurance with a prospective client, I usually ask them what they think their most valuable asset is. It’s not the home or automobiles or bank account (for most people, anyway) – it’s the ability to earn an income. One’s lifetime income is usually far more valuable than any other asset one might have.
So, why is it any different with life insurance? You are still protecting the income, but the difference is who will be the beneficiary of the life insurance policy’s payout? If you can no longer work due to illness or injury, a long-term disability policy will replace some of the future income you would have earned, had you been able to continue working. The same is true for a life insurance policy, except it is your loved ones (or business partners, if used for business purposes) that will continue to receive your “income” (typically in a lump sum), so that they can continue in the lifestyle your income allowed.
When my clients’ needs are strictly income replacement, I usually recommend term life insurance for the period of time they think they will be working. The death benefit should be the amount of income one expects to earn during that period of time. If the life insurance needs extend beyond income replacement, then a permanent policy (whole or universal life) might be the recommended policy.