Life insurance missing piece of financial portfolios: survey

Slightly less than half of U.S. adults who have a financial advisor and a financial plan have ever discussed adding life insurance to their plans, according to a survey released Tuesday by Saybrus Partners, a life insurance partnership firm in Hartford, Conn.

Fifteen percent of respondents who said they had discussed life insurance with their advisors did so more than 10 years ago, while 40% have discussed it within the past year, Saybrus said in a statement.

However, even with discussions about life insurance becoming more common, as likely as not these do not include a review of existing policies concerning issues such as performance, affordability and potential policy lapse. Forty-seven percent of respondents with life insurance and a financial advisor have never reviewed their existing policy with them.

The Saybrus survey was conducted online by Harris Interactive between July 22 and July 26 among 2,410 U.S. adults aged 18 and older, of which 786 said they currently had a financial advisor.

One-third of respondents with a financial advisor and a financial plan said that over the last two years, their advisor had recommended adding some form of insurance to their financial plan, though less than one quarter were advised to specifically include life insurance. Only 10% said their advisor had recommended long-term care insurance.

Eighty-one percent who have both a financial advisor and life insurance said the primary reason they carried such policies was to protect their family and/or heirs. But only 17% cited wealth transfer as a primary reason they had life insurance, and 15% cited the potential for cash accumulation, which is a key feature of many permanent life insurance policies.

 “These statistics demonstrate that typical life insurance policyholders may not be aware of the many other uses for life insurance beyond family and heir protection,” Kevin Kimbrough, national sales manager at Saybrus, said in the statement. “Life insurance offers potential for tax-efficient cash accumulation, which can be accessed for a variety of reasons including supplemental retirement income or health-care costs, as well as a tax-efficient vehicle to provide for heirs.”

According to the survey, 83% of U.S. adults who have a financial advisor and life insurance expressed interest in life insurance policies that carried additional features not present in their current policy. For example:

  • 30% said they would find beneficial a feature allowing them to receive the life insurance payout as income if they were diagnosed with a terminal illness;
  • 28% indicated coverage for long-term care needs would be beneficial;
  • 18% thought a waiver of premium payments if they became disabled would be a beneficial addition to their policy.

The survey also asked respondents with a financial advisor to indicate areas where they expected their advisor to be knowledgeable.

  • 70% said mutual funds;
  • 68% chose stocks and equities;
  • 38% expected their advisor to be knowledgeable about life insurance.

 “[Clients’ relatively low expectation] presents an opportunity for advisors to go beyond their clients’ expectations and address a critical element of the financial planning process,” Kimbrough said. 

 

About the Author

Michael S. Fischer

Michael S. Fischer is a regular contributor to ThinkAdvisor, focusing on tax and estate planning, philanthropy and other wealth management issues. He previously wrote about alternative investments as managing editor at MARHedge and as senior financial correspondent at Thomson Reuters.

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