Bear market = More insurance sales

Most financial advisors work on commission. When investment sales are down, advisors often turn to talking about insurance – the in-house sales and marketing material often talk about various strategies involving life insurance, critical illness insurance, disability insurance and long term care insurance. Insurance policies pay surprisingly large commissions. For example, a simple term insurance policy costing you $20/month can generate hundreds of dollars of up front commissions.

Whether you need the various types of insurance (and how much) is up to you and your advisor to decide, but don’t forget to get a detailed quote which outlines what is known as a “needs analysis”. A needs analysis will calculate your funding shortfall in the event of death (or disability, critical illness, etc.) based on your input and estimated expenses. It doesn’t hurt to review your needs analysis over time as well – you may find that you are under-insured… or over-insured.

Preet Banerjee
Preet Banerjee
...is an independent consultant to the financial services industry and a personal finance commentator. You can learn more about Preet at his personal website and you can click here to follow him on Twitter.
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Showing 7 comments
  • Life Critical Illness

    It’s fine for advisers to start recommending insurances when investment sales are down but you just hope that they do a good job and think about the client’s needs too and not just commissions. The majority of advisers do care. At the same time you hope that those buying insurances now realise what it is that they are buying and don’t just cancel the policy 10 months down the line

  • Preet

    @ Life Critical Illness – I agree that many advisors do care, but I disagree with your statement that “it’s fine for advisors to START recommending insurances” since that implies they are not identifying the insurable risks during bull markets. The risks should be identified and addressed independent of the stock market condition (or trailing revenues/commissions).

  • tom

    Sales are sales and the adviser is out to make money and it is your job to know what you want and not get sold to on something you don’t need.
    It is not really his fault if you buy something without asking questions and regret it later.

    In terms of insurance being cheap, I have not looked at the number but it may be true, however, if inflation is hitting us hard, how much will that 100K policy be worth in say 10, 20 or more years down the road?

    I guess you should only buy if you need it and calculate the long term potential and effects of it.

  • Mark Wolfinger

    “advisors often turn to talking about insurance”

    Yes, but never portfolio insurance. Why is that? Oh yes, they don’t understand how options work.

  • financial advisor

    This is a hot topic right now because for many people, their permanent (or whole life) insurance policies are the only thing positive over the past 1, 5 and 10 years. It doesn’t mean insurance should be your only retirement savings, but it has certainly proven to be a good portion for many people.

  • trading short

    This is a hot topic right now because for many people, their permanent (or whole life) insurance policies are the only thing positive over the past 1, 5 and 10 years.It is not really his fault if you buy something without asking questions and regret it later.I guess you should only buy if you need it and calculate the long term potential and effects of it.

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