Understanding and approaching clients based on personal financial life stages can help determine life insurance needs as well as spot current and future financial objectives where life insurance can be the foundation.
In this approach, there are 4 distinct financial stages–planning, building, achieving and succeeding (see chart).
To identify a client's stage, start by obtaining answers to a few simple questions. Consider using a life-event checklist–asking about changes in marital status, starting or purchasing a business, a new job, promotion or health concerns–to gain insight into events that may motivate the person to take action in a specific area of financial solutions.
Second, ask concerns-related questions. For example: "Are you concerned that your family will not be able to maintain their life style in the event of your death?" "Are you concerned about funding for both medical costs and income in the event of a chronic or terminal illness?" "Are you concerned that your current retirement savings plan will not meet your retirement income needs?" This can help build rapport as well as help determine the current life cycle stage.
Each stage presents its own risk:
Planning Stage: The primary financial risk during this life stage is loss of income upon death of the primary income earner. This results in an immediate need to pay final expenses or medical costs as well as to continue to pay ongoing monthly living expenses for the family.
Determining need in modern families is more complicated than in the past because the "husband as breadwinner" scenario is no longer as common as it once was. In dual income households, the analysis must therefore assume that 2 incomes need to be replaced. There are also more single-parent families; here, the need for income protection is even more important.
Building Stage: A primary financial risk during this stage is the ability to earn an income plus save for retirement.
The economic impact of an early death on present and future needs can be significant. Whereas previous generations depended largely on pensions and Social Security for most retirement income and on the employer for comprehensive health coverage, today's workers are picking up more of their health insurance costs, and more retirees are relying on 401(k)s, IRAs and personal savings for retirement income.
