Every September, our industry spends a month telling people to buy life insurance.
Life Insurance Awareness Month exists for a good reason. There is a real and well-documented coverage gap in this country. Millions of households own no life insurance at all, or far too little, and a death in one of those families becomes a financial catastrophe layered on top of a personal one. The campaign is aimed squarely at that gap, and it does useful work.
It is simply not aimed at the families we serve.
Many of the families and business owners we work with do not have a coverage gap in that sense. A number of them already own several policies, bought at different times, from different advisors, for different reasons, some of which no one has revisited in a decade. Their problem is not awareness. Their problem is fit.
So we spend September the way we spend the rest of the year. We do not open with life insurance. We open with the problem, and we arrive at the instrument only after we understand what it is being asked to do.
A Product-First Conversation Answers the Wrong Question
When the product comes first, the analysis can bend to fit it.
The conversation opens with a policy type, or with a premium the client can comfortably carry, and the design question quietly becomes what can be funded and illustrated rather than what the obligation actually requires. Nothing improper has occurred. The sequence has simply reversed, and the recommendation is now anchored to a number that came from the client’s cash flow instead of from the problem.
We see the result years later, usually during a review. Coverage sized to a budget rather than to an obligation, sometimes well short of what a death would actually cost the family, sometimes considerably more than the problem ever called for. A death benefit built against a balance sheet the family has since outgrown.
We also see families who have accumulated coverage over decades from several advisors, none of whom knew about the others. We want to be fair about that. Layered coverage is frequently rational. Families buy at different ages, in different health, against different liabilities, sometimes across multiple carriers on purpose. The issue is rarely that the policies exist. It is that no one has ever evaluated them as a single portfolio and asked what the whole of it is now doing.
The right answer to the wrong question can be devastating. An answer built before the question is defined tends to be an answer to something else. Success happens when you ask the right questions.
What We Lead With Instead
Before any instrument enters the conversation, we work through four questions with the client and their other advisors.
First, what is the obligation? Something in this family’s future will require cash the family does not have sitting idle. An estate tax. A buyout of a departing partner. An equalizing payment to the child who did not join the business. Support for a surviving spouse. The obligation has to be named specifically, and sized, before anything can be built to meet it.
Second, when does it come due, and how certain is the timing? This question most often determines the answer. An obligation with a known date and an obligation triggered by a death are different problems, and they call for different tools.
Third, what already exists to meet it? Liquid assets, marketable securities, buy-sell funding, borrowing capacity, and the policies the family already owns. In our experience this step alone frequently changes the shape of a recommendation, and occasionally eliminates the need for one.
Fourth, what is the shape of the gap? How large it is, when it opens, and how long it stays open. A gap that lasts eight years is a different engineering problem from one that lasts a lifetime.
Only at that point do we talk about instruments, and life insurance is one candidate among several. Sometimes the answer is a change to the trust rather than an addition to it. Sometimes it is a liquidity reserve, a credit facility, a restructured buy-sell, a different distribution schedule, or a tax-payment strategy available under existing law. And sometimes it is life insurance, chosen because it does that specific job better than the alternatives, and sized to the obligation rather than to a budget.
Almost none of those four questions can be answered well by an insurance advisor working alone. The attorney knows whether the ownership structure does what the family believes it does. The accountant can project what the liability looks like under current law. The wealth manager knows what liquidity already exists and what creating more of it would cost the family. We would rather be in that analysis with them than hand them a conclusion at the end of it.
A Bridge, Not a Monument
One example shows the difference clearly, and it comes from the wealth management side rather than the insurance side.
Consider a business owner who expects a sale or a recapitalization in eight or ten years. When that event happens, the family will have liquidity and a wide range of choices. Until then, nearly everything they own sits inside an operating company that cannot be sold quickly, or partially, or on anyone else’s schedule.
If the owner lives to the transaction, the family has options. If the owner dies before it, the family faces a liquidity problem at the worst possible moment, and whoever is on the other side of the table knows it.
Nothing about that exposure is permanent. It has a beginning and a reasonably identifiable end. What the family needs is coverage that carries the mortality risk across the years between now and the liquidity event, sized to what a death would actually cost them inside that window.
The same logic can apply to a family deliberately building a liquid reserve while the bulk of their wealth stays concentrated elsewhere. The reserve is the long-term answer. Insurance carries the risk until the reserve exists. That version asks for more care, because an obligation like an estate tax generally grows along with the estate, so the comparison has to be run against assumptions the family and their advisors have actually examined.
Two cautions belong here as well. Coverage is priced on age and health at the time it is issued, so a policy bought later costs considerably more and may not be available at all, which makes deferral a real cost rather than free optionality. And a policy that has done its job may remain among the more efficient assets in the estate rather than an expense to shed once the bridge has been crossed.
The point is not that the insurance is temporary. The point is that it was selected to do a defined job, over a defined stretch of time, because it was better at that job than anything else available. That is what it looks like to use life insurance as a tool rather than to lead with it as a product.
When the Answer Is Life Insurance, We Say So Plainly
None of this is an argument against the product. We would be poor advisors if it were, and we would be ignoring what the instrument is genuinely good at.
Life insurance often solves a problem that is difficult to solve any other way. It can place cash in a family’s hands at the moment of a death, without requiring anyone to sell an asset at whatever value that asset happens to carry that week. That is the real advantage, and it matters most for families whose wealth sits in a company, a property, or a concentrated position they would rather not liquidate under time pressure.
The death benefit is generally received free of income tax, and when a policy is properly owned and structured, it can sit outside the taxable estate. Both of those depend on the facts and on getting the structure right, which is a meaningful share of the work.
When the analysis points there, we say so without hedging, and then we do the harder part of getting the ownership, the structure, and the carrier right.
The difference is that we arrive at that recommendation, rather than start from it.
Five Questions Worth Asking Before Anyone Shows You an Illustration
Whether you are a client weighing coverage or an advisor whose client has been presented with it, these five questions tend to reveal quickly whether the sequence was followed.
- What problem is this policy meant to solve, stated in a single sentence?
- What happens to the family if that problem goes unsolved?
- What else could solve it, and why is insurance the better answer here?
- How long does the policy need to do this job?
- Which other advisors need to see this analysis, and how does the recommendation fit alongside the legal, tax, and investment plan?
A recommendation built in the right order answers all five without difficulty. A recommendation built around a product tends to struggle with the third.
Clarity, Confidence, and Coordination
September is a good month to make this distinction out loud.
Awareness campaigns are aimed at families who need to be told that life insurance exists. The families and business owners we work with already know. What they need is someone willing to examine the whole plan first, and to recommend a policy only when the plan calls for it.
That is what the three words we keep returning to mean in practice. Clarity is knowing precisely what the obligation is, and when. Confidence is knowing why this particular solution is better than the alternatives for this particular gap. Coordination is knowing how it works alongside the legal, tax, and investment plan, and who else needs to be in the room before anyone commits.
At C3 Financial Partners, life insurance is one of the most powerful tools available in that work. It is rarely the place to begin.
If you or your clients are weighing a coverage decision and would like the analysis done in that order, we would welcome the conversation.
Securities offered through Valmark Securities, Inc., member FINRA, SIPC. Investment Advisory Services offered through Valmark Advisers, Inc. a Registered Investment Advisor, 130 Springside Drive, Suite 300, Akron, Ohio 44333-2431, 1.800.765.5201. C3 Financial Partners, LLC is a separate entity from Valmark Securities, Inc. and Valmark Advisers, Inc.
