September is Life Insurance Awareness Month, making it a natural time for wealth managers to revisit an often-overlooked part of the planning process. The conversation may not be about purchasing something new, but about reviewing what a client already owns.
Life insurance policies often remain unchanged for years or even decades. During that time, clients may experience significant changes in their family, business, wealth, health, or financial priorities. A policy that once made sense may no longer meet the needs it was designed to address.
Wealth managers can play an important role in keeping insurance aligned with the broader financial plan. By initiating policy reviews, they can help clients identify gaps, assess risks, and determine whether existing coverage still supports their goals.
When the Plan Changes, Review the Policy
Clients typically purchase life insurance for a specific purpose, such as income replacement, family protection, business agreements, or legacy planning. These needs can change over time, especially after a major life event like divorce, remarriage, welcoming children, selling a business, or experiencing a significant change in net worth.
Older permanent policies may not be performing as originally projected. Extended periods of lower interest rates have quietly impacted some policies built on assumptions that did not materialize, resulting in decades of underperformance and potential cash value erosion.
These changes can be difficult for clients to identify on their own. Wealth managers can assist by making policy reviews a regular part of financial planning conversations.
Start With the Right Questions
Wealth managers do not need to be insurance experts to start the conversation. Asking a few straightforward questions can help determine whether an existing policy still remains relevant:
Why did you purchase this amount of coverage?
Why did you choose this type of policy?
What do you expect the policy to do for you?
If the answers are unclear, it may be time to take a closer look. An in-force illustration can provide a current view of how a policy is performing. From there, wealth managers can evaluate whether the coverage still supports the client’s needs.
Look for Gaps and Risks
Once the policy’s purpose is clear, wealth managers can look more closely at the details that may have changed over time.
Beneficiary designations are a simple place to start. An ex-spouse, deceased family member, or minor child may still be listed years after the original designation. Coverage amounts may also need to be revisited. For business owners, a life insurance policy used to fund a buy-sell agreement may no longer provide sufficient coverage if the business value has grown significantly.
Term policies may also warrant a closer look. Wealth managers can evaluate the remaining term, whether coverage still meets the client's needs, and if conversion provisions could be beneficial if the client's health changes.
Other areas to review may include premium funding, policy loans, lapse risk, and policy riders. Some policies may include chronic illness or long-term care riders that aging clients may not realize they have.
An in-force review can bring these details together and help determine whether the policy still serves its intended purpose.
Bring in the Right Expertise
Insurance can be complex, but identifying a potential issue does not require becoming an insurance expert. Wealth managers can identify, flag, and refer needs to an insurance specialist.
The SS&C Black Diamond® Wealth Solutions Annuities & Insurance Marketplace (AIM), helps wealth managers bring insurance and annuity solutions into the planning conversation. With access to a range of solutions and support from insurance specialists, wealth managers can evaluate options and determine next steps when a policy review uncovers a need.
Life Insurance Awareness Month is a timely reminder to talk about protection. Incorporating insurance into the planning process empowers wealth managers to deepen relationships and demonstrate value beyond portfolio management.
To learn how SS&C Black Diamond Wealth Solutions supports insurance and annuity strategies, request a personalized demo, contact the AIM Consulting Team at 1-888-680-0830, or email info@sscblackdiamond.com today.
