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Written by: Equitible | Equitible
While it may seem counter-intuitive to say that clients who are debt-free and single need life insurance, you might be surprised to find out that many actually do. Here’s why they might want to consider adding coverage.
Pay funeral costs
1. They don't want someone else to have to pay their end-of-life and funeral expenses.
Without some kind of insurance – even a small term life insurance policy – or other assets, parents or other relatives will end up paying the funeral costs if your client dies unexpectedly. There can be other end-of-life expenses too, such as hospital bills or other costs associated with their home, work, or personal life.
Get the best rates
2. If they’re young and healthy, they’ll get the best rates.
Purchasing life insurance when your clients are young and healthy may also be cost-effective. That’s because, as your clients get older (and potentially less healthy), the rates they’ll pay will increase. Why not lock in lower rates now? Buying young can also protect their future insurability, since insurance companies often let clients convert from one policy (term) to another or add coverage at a later date (option to purchase additional insurance rider), without having to go through new underwriting.
Leave a legacy
3. They want to leave a legacy.
They may not have children, but what about brothers, sisters, or even parents who may be struggling financially, or someone else who depends on them? Make sure those special people are taken care of if your clients are no longer around. Or, for a small premium, they could leave a legacy to a favorite charity or cause. Life insurance death benefits are typically income-tax-free to the beneficiary. Remember that life insurance has leverage (the death benefit is initially significantly higher than the annual premiums).
Plan ahead
4. They may not be single or debt-free forever.
Many life insurance policies let clients trade up (convert) or add coverage, so buying a small policy before they get married or buy a home may be a good idea. Again, the sooner they purchase life insurance, typically the lower their rates, at least for their initial coverage.
Save more for retirement
5. They make too much to qualify for a Roth IRA, but still want to save more money for retirement.
If your clients make too much income to qualify for a Roth IRA, and have already maxed out their other retirement plans, they may want to consider permanent (cash value) life insurance. They can pay premiums and their money has the potential to grow tax-deferred, much like a retirement plan. But with a cash value life insurance policy, they aren’t limited by contribution or income limitations. And, if the policy is set up correctly, they can take loans from the policy income-tax-free.
Loans and partial withdrawals will decrease the death benefit and cash value of a life insurance policy and may be subject to policy limitations and income tax. In addition, loans and partial withdrawals may cause certain policy benefits or riders to become unavailable and may increase the chance a policy may lapse. If the policy lapses, is surrendered, or becomes an MEC, the loan balance at such time would generally be viewed as distributed and taxable under the general rules for distribution of policy cash values.