Financial planning professionals apply diversified techniques to determine the life insurance needs of a family. Life insurance planning involves essentially three principal, but often overlapping needs areas:
- Income replacement and family needs analysis
- Business insurance needs analysis
- Estate preservation and liquidity needs analysis
A comprehensive study of the client’s financial needs and concerns generally is the best way to conduct life insurance planning. The process of life insurance planning must begin and end with the objectives and goals of the client being paramount, even if such objectives and goals do not conform to what the adviser considers proper or appropriate values or concerns. This is not to suggest that the adviser does not have a responsibility to educate the client about the potential uses and abuses of insurance, issues normally considered when assessing life insurance needs, ownership issues, tax effects, and the like. However, ethics and prudence require that the insurance plan satisfy the client’s objectives; clients simply will not implement a plan, however well-conceived and however appropriate, if they are not satisfied that it meets their objectives.
Reproduced with permission. Copyright The National Underwriter Co. Division of ALM