Your credit union likely makes most of its life insurance sales to members who are newly married or starting a family. But did you know there are a wide variety of life events that prompt the need for coverage? Training your staff to identify these scenarios can lead to better member service and, ultimately, more policies sold. Here are five under-the-radar needs for life insurance coverage:
1. Coping with end-of-life expenses. Final expense insurance is designed to cover the burial expenses as well as unpaid medical bills at the time of a loved oneās passing. The death benefit is paid directly to a named beneficiary (often a spouse, an adult child or even a funeral home) who decides how to spend the money. The death benefit is usually a low to moderate amount (generally as high as $25,000) to cover only the final expenses, and is not intended for income replacement or to cover mortgage payments, college funding or any other large financial responsibility.
So, who is an ideal candidate for final expense insurance? Generally, those over 50 with moderate income and some outstanding debt are best suited for this product, particularly if they also have health issues.
2. Settling estate taxes. Members with significant wealth and a large estate typically find value in life insurance for the specific purpose of paying estate taxes and settlement costs rather than having to liquidate estate assets.
Additionally, creating an Irrevocable Life Insurance Trust may be the most effective method of ensuring that life insurance funds are available when needed. Although the trustee may apply for life insurance, they are not the owner and beneficiary of the policy, the trust is. The death benefit is paid to the trust. Itās up to the overseeing trustee to disburse the death benefit to the beneficiaries of the trust according to the terms.
3. Passing on money to the next generation. In their later years, people often strategize about how they would like to transfer wealth to the next generation. Typically, these assets are housed in savings vehicles like CDs, mutual funds, savings accounts and taxable brokerage accounts. However, inheriting money through these vehicles can come with hefty taxes.
Single premium whole life insurance is an alternative route to the same destination. With this tool, policyholders can make one lump-sum payment that provides the beneficiary with a guaranteed tax-free death benefit at the insuredās death. A single premium whole life policy may be the appropriate choice for reasonably healthy individuals who are between the ages of 50 and 80 and have some legacy money earmarked for their loved ones or favorite charitable organization.
4. Donating to charity. Life insurance may be used to benefit certain charitable, religious, scientific or educational organizations, and provide favorable income and estate tax benefits to the donor, provided that person gives up all rights to and interests in the policy.
The extent of any tax benefit that the donor may receive will vary. It is important for individuals to have a conversation with their tax accountant or financial planner before deciding what method would make the most sense for their personal circumstances.
5. Planning for business continuation. For business owner members especially, there is increased risk involved with the financial responsibility of running your own company or engaging in business with other parties. In many cases, life insurance can be used to offset unexpected costs that may arise in the following situations:
As your credit union explores new avenues of growth, donāt discount the potential for existing life insurance offerings. It all comes down to getting to know your members, where they are in their lives and what financial goals are important to them. With this knowledge, youāll be better able to identify new sales opportunities like those listed above.
Craig Simms is SVP and Chief Marketing Officer for Vantis Life Insurance Company. He can be reached at 860-298-6005 orĀ [email protected]