An advisor called the other day stating that many of his peers do not even bother to offer the various riders that are available when working on mid-market life sales.
He was talking about long-standing riders (or options, depending on policy design) such as waiver of premium, accidental death and dismemberment, etc. Apparently, his peers don't want to add too much cost to the policy, thus killing the sale.
A question attorneys are often asked about this is: do people really file lawsuits accusing advisors of not mentioning certain product types and options that are available? For example, when a new type of life product option comes out, is the advisor obligated to discuss it? If not, could the advisor be sued later on for failure to mention/discuss it?
The advisor above summed it up this way: "is legal liability in this area just marketing hype, or is it an important and legitimate factor for me to consider?"
The simple answer, without being flippant, is: advisors can always be sued.
A lawyer once told me that, "if you are in business as an advisor and don't get sued, you are not really in business." While I understand his point, I don't agree. People file lawsuits for all kinds of reasons, and you can't stop that from happening. But, what an advisor can do is to take steps to minimize liability if that happens.
For example, what does the advisor's business card say? If it intimates that the agent is the superhero of the life insurance business, who can solve all problems with a single bound, and if the customer later finds himself underinsured or uninsured, then the advisor can expect to be sued and possibly to be held liable for superhero representation, so to speak.
But what if a prospect discusses concerns with the advisor and there is a product available that could address that concern? Here, the failure to advise the client about the product could be negligent. The responsibility of the agent probably rises with the amount of information the customer has given to the advisor.
Advisors may also be held responsible for what a customer can reasonably expect the advisor to know. Insurance agents should know, for example, what the policies they sell provide. These agents should select policies that address the needs of their customers.
