Director outlines why rising costs of living should prompt new conversations about life insurance
Your clients may not be as well covered as they were five years ago. Even if their coverage amounts have stayed the same, the simple fact of inflation has eroded that purchasing power. According to the Bank of Canada’s inflation calculator, the average cost for goods and services have risen 18.42 per cent since 2019. The life insurance coverage you secured for your client does not have the same purchasing power as it once did. It may then be inadequate.
The trouble with inflation, however, is that it impacts so many facets of daily life. As clients managed a pandemic, massive market swings, and hits to their weekly grocery and gas bills, they did not have the time or mental space to reconsider their life insurance coverage. That’s why Jean Salvadore, senior director of life and living benefits at RBC insurance, says its time for advisors to reopen the life insurance conversation with their clients.
“The decision to purchase insurance is based on a certain prognosis of the future, what someone think their family needs if they were to pass away,” Salvadore says. “I think the biggest issue we’re trying to raise is that when people first purchase that policy they think about all those factors, but over time things change. In a situation like today, with high inflation, we need to ask if we have taken the time to reassess the situation and made sure that clients’ life insurance needs are still relevant to their situation.”
Change is a constant in anybody’s life, creating an inherent flaw in a life insurance plan built on a singular momentary ‘snapshot.’ Not only do economic circumstances change through forces like inflation, recessions, or market events, but people’s lives change as they have kids or those kids leave home, as their parents age, or as they age themselves. Salvadore believes it’s the role of the advisor to incorporate that aggregation of micro and macro changes into a client’s plan.
Salvadore recommends using annual check ins to talk about insurance as well as investments. Put in the context of the wider financial plan, clients can more easily see the utility of these products. That said, reopening questions of life insurance is not always easy. Nobody likes to talk about their death, or the fear that their spouse or children won’t have the means to live if they pass away. Salvadore says, however, that big changes in life can serve as triggers for these conversations, a way to enter into the topic without an immediate dive into questions of mortality.
Just as personal changes like a new job, a marriage, a home purchase, of the birth of a child can serve as conversation triggers, Salvadore believes that economic changes can open these conversations too. Proactive communication around these topics can be a key source of advantage for advisors. Clients may not draw the line connecting inflation to their insurance coverage, but a well-worded email from their advisor may prompt them to make those connections.
Salvadore also believes that leveraging existing tools like a CRM can help ensure the maintenance of touchpoints with a client, allowing for a wider conversation about financial planning and insurance. Insurance should also be discussed in the context of other financial considerations. Applying that holistic lens, Salvadore says, can help show clients more clearly how life insurance fits into their financial plans.
Arguably the most important element of these conversations is trust. Trust can create connections and space for harder conversations about death and illness. Salvadore notes an RBC insurance study which found that 60 per cent of clients who have had open conversations about their estate feel financially secure. Just because a conversation is about inflation and mortality, too, doesn’t mean it can’t come with some talk of opportunity.
“Refocus the conversation on opportunities for your clients to meet their goals. For example, they may prioritize increasing an inheritance for loved ones, leaving a charitable legacy or making sure family isn’t paying out of pocket for expenses after they’re gone while money is being reviewed during probate,” Salvadore says. “Gently remind clients that—while losing a family member can be very hard—it is much harder to grieve while managing a complex set of finances without any preparation.”
