COVID-19 and Financial Checkups

A man seeing a doctor (Credit: Thinkstock)

Earlier this year, there was a brief moment when it looked as if COVID-19 would be just a small wrinkle in time. Very few of us anticipated the months of stay-at-home orders — and, for many, unemployment — that would become our new collective reality, with no end in sight.

As a life insurance agent, you know how important it is to have a proper end-of-life plan in place, but do your clients?

(Related: Estate Planning, COVID-19 and Grandparents)

When having conversations with your clients about life insurance or estate planning during this difficult time, you may find that many of them are in need of a financial reset, or at least a checkup.

You know they need to do many things to get themselves on the right track. Where do they start?

Here are four good first steps to recommend, to help them start prioritizing their emergency and end-of-life planning.

1: Set A Target Savings Goal.

The very first step in establishing a solid financial wellness plan is to set a goal of how much to put (and keep) in a savings account. Your client may have some savings set aside, but is it really enough?

Remember however, that a savings goal isn’t a one-size-fits-all concept. The target number should depend on how large your client’s family is, how many people are financially dependent on them, and what kind of lifestyle they wish to maintain.

Different financial experts have conflicting recommendations on how much money a person should have saved, and by what age. Some recommend that a savings target is a function of a person’s age and income. For example — have one year’s worth of income saved by the time you are 30, and five times your income saved by the time you are 50.

However, the point is to have enough money tucked away to be able to comfortably live in retirement. The secondary part of this step may be helping your client decide where to invest these savings, such as in a tax-advantaged retirement savings account or the stock market.

2: Prioritize an Emergency Fund.

You may find that many of your clients don’t realize that they should have a separate emergency fund, which is necessary to achieve ultimate financial health.

It’s important to explain to your clients that an emergency fund should be set aside in an account where the funds are liquid and easily accessible. This is because if an emergency were to happen, they could quickly retrieve the funds, use them as needed, and ensure continuity of life for themselves and their families.

Again, a target savings for an emergency fund should be a function of your client’s monthly expenses. It is recommended that anyone should have roughly three to six months’ worth of expenses saved up in case their income suddenly gets cut off. They may be eligible for unemployment benefits or an emergency grant for small businesses, but those can take months to get approved and even longer to receive the benefits. In addition, these benefits may not meet all of their needs.

3: Pay off debts.

While it can feel overwhelming to think about paying down debt (especially with all of life’s regular expenses) it’s critical as a life insurance agent to encourage your clients to do so. One way to put the importance in perspective is to explain the amount of interest that debt accrues on a monthly basis. Have your client provide an outline of all the different accounts they make payments to so that they can see a visual representation of which accounts have the highest payments and highest APR.

The debt snowball method, a strategy coined by Dave Ramsy, urges people to pay off debt in order of smallest balances to highest balances. This helps people gain momentum at a faster rate knocking out one balance at a time. Consider this suggestion when speaking with clients.

4: Set up an estate plan.

No one likes to think about their end-of-life arrangements, but this is simply a non-negotiable task for those who want to protect their family and legacy. The unexpected is just that — unexpected — and the only way to help ensure that your clients’ assets and loved ones are protected is to encourage them to set up an Estate Plan.

No matter your client’s age or stage of life, advisors cannot stress enough how important it is to make Estate Planning a priority. Luckily, there are online Estate Planning companies, like Trust & Will for example, that make it easy to create a customized, state-specific, legally-valid Will or Trust. The ability to complete an Estate Plan online, especially as shelter-in-place mandates continue, helps to make this otherwise daunting task very accessible for your clients.

During your career as a life insurance agent, you’ve probably been witness to some unique and sometimes tragic circumstances. That’s why there is no better expert than you to advocate that your clients put protective measures into place. Conducting a financial checkup following the tips above is exactly the framework they’ll need.

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Patrick HicksPatrick Hicks is head of legal at Trust & Will, an online estate planning service.

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