By: Mickey Gambale
As financial advisers increasingly focus on investments and trail fees, especially in markets like South Africa, life insurance risks are being overlooked as a foundational component of a well-rounded financial plan. Yet life insurance offers more than just a payout at the end of a client’s life; it is a powerful tool for protecting, building, and even transferring wealth across generations. In today's evolving financial landscape, understanding the multifaceted role of life insurance can equip advisers to deliver true holistic financial planning, ensuring clients’ needs are met not only during times of prosperity but also in times of vulnerability.
Life insurance as the bedrock of financial planning
Life insurance is often the bedrock of a financial plan because it provides the essential protection that investments alone cannot offer. While investments are designed to grow wealth, life insurance protects it. Without this safety net, unexpected events like death, illness, or disability could quickly erode even the most carefully constructed financial strategies. Critical illness cover or income protection, for example, ensures that life goals such as a child’s education or retirement savings remain intact, even during challenging times. Advisers who include life insurance in their planning provide clients with a balanced approach that both grows and protects wealth.
Industry Shifts: Securing coverage early
Access to life cover is becoming more restricted and costly due to refined underwriting standards, which assess risk more precisely. Since age is a major factor in health deterioration, securing life cover early is crucial. By locking in policies at a younger age, clients avoid the risk of being uninsurable later due to health changes. Options like Future Protector provide clients with a way to increase their coverage over time, allowing them to meet future needs without facing new underwriting hurdles. Advisers who emphasise early coverage not only help clients avoid future barriers but also position themselves as strategic planners focused on long-term security.
Beyond ‘Death Benefits’: The rise of living benefits
For many clients, life insurance is simply a death benefit meant to support their families after they pass. However, modern policies offer much more, including living benefits such as critical illness and disability cover. These features offer financial support when it’s needed most—during the policyholder’s lifetime. For example, a critical illness benefit can prevent clients from dipping into their long-term savings to cover medical expenses. By educating clients on these living benefits, advisers can shift the perception of life insurance from a passive safety net to an active financial tool that supports clients throughout their lives.
Adapting to longevity trends
Medical advancements and healthier lifestyles are enabling people to live longer, healthier lives, which in turn has redefined the role of life insurance. With more clients living beyond the age of a critical illness diagnosis, the value of flexible policies that provide for such scenarios has increased. Benefits like Cancer Claim Boosters or Critical Illness Boosters acknowledge that every diagnosis is unique and provide additional financial support in severe cases. Advisers who incorporate these features into a client’s protection plan offer adaptability and security that align with today’s longer life expectancies.
Balancing investments with risk cover
A comprehensive financial plan combines investments that build wealth with life insurance that protects it. For clients, this blend of growth and security ensures that their financial goals remain intact, regardless of unforeseen events. Advisers who position life insurance alongside investments are offering clients a complete package that includes both opportunity and peace of mind. Life cover often includes features such as Immediate Expense Benefits, which provide rapid funds in emergencies, preventing clients from needing to liquidate investments prematurely. This approach reflects a holistic planning strategy that resonates with clients looking for security and growth.
Life insurance as a tool for generational wealth
One of life insurance’s most compelling roles is its ability to create generational wealth. By positioning life cover as a tool to elevate families to higher income brackets, advisers can help clients build a legacy that lasts beyond their lifetime. Features like Terminal Illness benefits allow clients to access the policy payout before they pass, providing an opportunity to settle their affairs and financially prepare their families. Life insurance becomes more than just a policy; it becomes a family strategy for securing the future. This narrative of legacy building often resonates deeply with clients who want to ensure their family’s financial stability for generations to come.
Estate planning and liquidity
Life insurance is a powerful estate planning tool that offers liquidity without requiring the liquidation of other assets. By using life cover to address estate duties, clients can preserve core assets like property and investments for their heirs. This approach enables families to avoid the forced sale of valuable assets to cover expenses, safeguarding their long-term financial well-being. Advisers who incorporate life insurance into estate planning strategies add value by helping clients achieve efficient and effective wealth transfer, positioning themselves as holistic planners with a long-term focus.
Fostering long-term client relationships through regular engagement
Life insurance naturally fosters long-term relationships as policies require regular reviews and adjustments over time. Advisers who stay engaged with clients through these updates create lasting connections and maintain a continuous advisory role. This approach builds client loyalty and trust, enabling advisers to support clients throughout life’s stages. Additionally, life cover often extends to family members, allowing advisers to develop relationships with future generations. By helping clients adapt their coverage to meet new life circumstances, advisers secure not only policy loyalty but also valuable multigenerational relationships.
Standing out through holistic financial planning
In a competitive financial landscape, advisers who prioritise life insurance as part of holistic planning can differentiate themselves significantly. Risk cover reflects an adviser’s commitment to both growth and protection, demonstrating a deeper understanding of a client’s full financial picture. Clients appreciate advisers who take this comprehensive approach, often resulting in more referrals and higher retention rates. By incorporating life insurance into their client strategies, advisers not only protect wealth but also build strong foundations for long-term client loyalty and trust.
An innovative alternative to traditional retirement savings
Life insurance can also serve as a strategic alternative or complement to traditional retirement savings vehicles like Retirement Annuities (RAs). For clients seeking additional ways to secure their future, certain life insurance strategies—such as having children continue to pay premiums—can provide a significant payout that exceeds typical RA savings. This approach allows families to build wealth and cost-effectively ensure future financial stability. Advisers who introduce these options offer clients a flexible, innovative path that supplements conventional retirement planning, adding depth to their financial strategy.
Life insurance is a foundational tool in any financial plan, offering clients security, growth, and the ability to create lasting legacies. By integrating life cover into their strategies, advisers not only help clients safeguard their wealth but also position themselves as trusted, holistic planners who understand the value of comprehensive protection. In an increasingly investment-driven industry, life insurance remains an underrated cornerstone that allows clients to achieve long-term financial resilience and create opportunities for future generations.
For both advisers and clients, the power of life insurance goes beyond traditional financial security; it provides the opportunity to secure a future of health, wealth, and generational impact.
* Gambale is the head of distribution at Liberty.
PERSONAL FINANCE