Question: My insurance and financial planning process takes about 3 months to get a good, final report of recommendations for my prospect. That time delay makes me worry about what would happen if something were to happen to them while we were still planning. It keeps me up at night. How can I fix this?  

We are all just one heartbeat away from immortality. Or just one step away from morbidity too. This reality is driven home to me every time hear about or see advisors taking months and months to plan their prospect’s life insurance needs. All that work to come up with what they believe to be the exact right amount of life insurance that their prospect needs, what the right policy ownership should be, what the best plan is for them in their circumstances, who the right beneficiaries should be on the policy and how much they should and can pay could all be for nothing. Doing all that planning before we know if they qualify for coverage at all is like thinking they have a lease on life, and theirs won’t possibly be over or compromised until we’re through all the nitty gritty details. And when we are wrong, and something does happen, it’s a horrible mess. But it doesn’t have to be that way.

Here’s the thing. The exact amount of life insurance anyone needs is truly just a guess. No one knows for sure because there are so many variables in the calculation. Now, yours may be a very educated guess but it is still just a guess.

Think about it. What the exact costs to an estate might be, what the exact income taxes payable will be years in the future on that vacation home or investment property, what their family needs will be when the time comes, what interest rates will do, and where the financial markets will be decades in the future is speculation of the highest order. That’s before you get to the whole idea of knowing when the insurance proceeds will be needed – no one knows that either. All of this makes thinking you can guess precisely is arrogance of the highest order. All we can do is guess.

We don’t have to be arrogant and suppose we can see the future. We can plan around some standards for essential financial security and ensure that your prospects are planning while protected, not planning while exposed to insurable threats to their life and lifestyle.

What is certain is that some amount of coverage of some kind will be needed to meet the wants of your prospect every time you sit down to do your calculations. If you are “planning” you know that there is something to be done. That means that being on the safe side and getting some basic requirements protected is not only prudent, it’s responsible – for you and for them.

The solution is to build an EPP into your planning process – an Emergency Protection Plan that creates basic emergency coverage of a ballpark amount that will provide for the basic needs of your client while you are planning.

Prudent advisors give all their prospects the option to plan while protected, not plan while exposed to insurable threats like a health disaster or death of a major player in the planning. One unexplained pain or lump and all your planning could be for nothing. It might even test out your professional liability coverage. 

The solution to this problem is a simple EPP Assessment. These can vary depending on the market but for an upper-middle income family that assessment can put you in the right coverage ballpark by totaling these basic needs and approximating their coverage: 

  • Outstanding Residence Mortgage Value plus 5% (cancelling a mortgage always costs money, be sure it’s available) 
  • 20 times the breadwinner’s income to provide a taxable 100% of their income for life to survivors based on a 5% return on proceeds invested – providing money for life allows for an inflationary increase when required, unexpected extras and consequently improved essential financial security 
  • Add a factor for final medical, funeral, and burial expenses 

So, for a breadwinner with a $100,000 income and a $500,000 mortgage the EPP amount would be 20 x 100k = $2 Million plus $525K plus $50,000 = $2,575,000 of short-term insurance with excellent conversion options to give you flexibility. You can always change on delivery or later. 

The price for this emergency only term allows you and your prospect to plan the exact amount, type, premium and details without the impending doom pressure of an illness, injury, or death leaving the family with nothing but a fancy plan they couldn’t execute.

If they turn you down on the EPP coverage even after you explain it clearly, then you don’t have to lose any sleep regardless of what chance brings. You’ll know you made the effort and have the recommendation to prove it. It’s the professional solution. 

More likely though, you’ll help a family or business be ready for anything. Regardless of how long the financial plan takes.

This column by renowned advisor coach Jim Ruta was first published in the December 2022 edition of Insurance Journal magazine.

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Jim Ruta’s mission is simple – to preserve, promote and propel the financial advisor business. A former insurance advisor and executive manager of a 250-advisor agency, Jim is a highly regarded coach, author, podcaster and keynote speaker. He has spoken 4 times at the MDRT Annual Meeting including the Main Platform. Jim Ruta is an Executive Coach and Keynote speaker specializing in life insurance advisors and leaders. He works with top advisors around the world and re-energizes audiences with his deep insight and passion. 

If you have a question for Jim, you may send an email to [email protected]