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June 16, 2014

How Your CPA Can Help With Your Life Insurance


Communication in the 21st century is quite different than just 10 years ago. Texting and email have come to dominate much of the communication in a business relationship while good, old fashioned face-to-face meetings and telephone conversations are becoming less and less frequent.

The effectiveness of this approach is, however, less than ideal in beginning the discussions that need to occur before important decisions on life insurance, estate planning and business succession planning are made.

Using Your CPA When Buying Life Insurance

Why not involve your CPA in the initiation of this planning? Ask him or her to discuss and review your current program. Your accountant has a great understanding of your business, personal and financial means and background. Your CPA understands your financial picture, your risk tolerance and, most importantly, has guided other clients through their planning by connecting them with well-qualified, independent and experienced life insurance professionals.

These independent professionals possess the knowledge to successfully navigate the sometimes complicated process of bringing a client from recommendation to underwriting through to plan implementation. While some CPA’s may be well informed on product differences and planning strategies, this is not their area of core knowledge.

One of the key ways your CPA can best serve you is to steer you toward a trustworthy and independent insurance professional to help you navigate the often underestimated arena of life insurance planning. Insurance professionals often say, "most people spend more time planning their summer vacations each year than they do discussing their insurance and estate planning."

Using an Objective Party Can Help Secure the Best Deal

Individuals interested in purchasing life insurance sometimes seek advice from friends or relatives they see as being well versed in financial matters. They assume that these people must be a good resource for life insurance advice. However, this approach ignores the fact that there are many factors that need to be considered when determining and recommending an appropriate and individualized insurance program.

The financial strength of the carrier and premium outlay are, of course, critical. Equally as important though is the essential benefit of engaging in a dialogue with a highly experienced and independent insurance professional.

When a policy holder works with an independent producer, that individual is able to access both product designs and potentially improved underwriting based on the autonomous agent’s knowledge of competing carrier’s different underwriting standards. On the other hand, recommendations provided by a “career agent” may not take into account the breadth of possible solutions (solutions which may be better in a certain circumstance) offered by competing companies.

While some career agents do branch out and offer products & solutions from other life insurance companies other than their primary carrier, there is often the incentive for them to market for their career company as such agents need to validate their contract for health and pension benefits.

This is not the business model that an independent insurance producer operates under. He or she works with many insurers as an independent contractor and does not have an employee/employer relationship with any one carrier. An insurance professional able to be flexible in this way is accustomed to routinely questioning offers from underwriters and will pursue other insurance companies for an underwriting and product availability assessment to determine if abandoning one insurer for another is in the best interest of the client. Career agents have less flexibility to do this as they do not often have the motivation or the flexibility to “switch gears” so nimbly.

Other outlets for purchasing life insurance are wealth managers and property and casualty firms. While some can offer good resources to their clients, there can be limitations in their ability to advise due to compliance issues, revenue sharing arrangements and various other complexities including the full independence necessary to do the best and most thorough job for the client.

Why Utilizing Your CPA is the Best Solution

Looking at your growing stock portfolio or college savings plan is not the only way to gauge your financial health and security. Your current and future financial stability requires thoughtful and professionally guided consideration of your insurance portfolio. Life and disability insurance are not commodities that should be purchased online without the guidance of an experienced insurance professional working alongside your other trusted advisors.

The advice necessary to make a fully informed decision is not easily obtained and understood utilizing today’s often shorthand methods of communication. It’s strongly recommended that one take the time to fully explore and evaluate their position in terms of their personal goals and exposures as it relates to their fiscal well-being.

Your CPA and attorney are advocates and can be great resources. Allow them to guide you towards a relationship with a life insurance professional that can provide you with an independent review of your insurance program to make sure that your interests are served beyond simply an outlay of premium dollars.

By Steven A. Fishman, CLU, Norwood Financial Group LLC

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