“I would love to live like a river flows, carried by the surprise of its own unfolding.” —John O’Donohue
I like this quote for its poetry and sentimentality; however, as much as surprises can be delightful–they can also be devastating, depending on what life brings.
Imagine a conversation like this:
Claims Processor: “Good afternoon. How can I help you?”
Female Caller: “I am calling about my husband’s life insurance policy and claim.”
(Claims Processor collects the caller’s name, the deceased’s name, date of death, and the policy number.)
Claims Processor: “Thank you. Now, how can I be of assistance?”
Female Caller: “Well, I sent the Death Certificate and Claims form to your company over a month ago and have not heard anything from you since.”
Claims Processor: Typing… “Our records indicate that we did receive the Death Certificate and Claims form. I also see here that we remitted the check for the death proceeds ten days ago.”
Female Caller: “You did? What address did you use?”
Claims Processor: Typing… “Oh, I am sorry. We do not show you as the rightful beneficiary.”
Female Caller: “What? What do you mean? Who did you send the money to?”
Claims Processor: “I am sorry Maam, but you are not entitled to that information.”
Female Caller: “Hold on. Just wait. Don’t tell me you sent the money to his ex-wife!”
This is the kind of surprise life can bring when care is not taken.
The above conversation is fictitious only in the sense that the situation is merely representative. The harsh reality is that very similar conversations take place regularly. Nothing about the conversation is imaginary.
Question: When was the last time you systematically updated your clients’ beneficiary designations?
Sadly, a tremendous number of people still have prior spouses or deceased relatives named as the current beneficiary on a retirement account, or on a life insurance policy purchased years ago.
It is imperative that independent financial professionals stay current with their clients. Marriages, divorces, births, deaths and other major life events generally require policy holders and account holders to review and, if necessary, update beneficiary designations.
Negligence in reviewing beneficiary designations can lead to one of the most common and potentially costly insurance, retirement and estate planning errors that clients can make. In cases like the one described, in which a divorce occurred followed by negligence to update the beneficiary designation, the ex-wife or husband receives the proceeds.
Point #1: All independent financial professionals owe it to their clients to be intentional and consistent in helping them maintain up-to-date beneficiary designations.
Building a Bridge to Beneficiary Satisfaction
“I learned that a long walk and calm conversation are an incredible combination if you want to build a bridge.” —Seth Godin
Getting the most out of your clientele means building relationships. Strong relationships are built by providing practical and periodic reviews that can help your clients stay informed and organized in order to make better decisions. Things that are important take time and thought, which is why they are often overlooked. Would your clients know where in their life insurance policies the beneficiaries are named or what the carriers have on record?
Clients are exceedingly satisfied when their financial advisors surpass their expectations, even slightly. One simple step to achieve client satisfaction is to automate an annual review of coverages, types of policies owned, status of the policies and the named beneficiaries.
- This simple review can:
- Keep them out of a bind
- Help them make decisions
- Prevent negative surprises
- Enhance their trust in the relationship
The basic participants in a life insurance contract are:
- Contract Owner: The person who owns the life insurance policy.
- Insurance Company: The company that issued the policy.
- The Insured: The person whose life is being insured by the life insurance policy.
- The Primary Beneficiary: The person who will receive the death benefit when the insured person dies.
Question: Which of these four participants receives the least amount of attention from the independent financial professional?
Typically, the primary beneficiary is someone the independent financial professionals do not know well.
It is possible to build a bridge to beneficiaries that will lead to future revenue.
Important Reminder: As you design the bridge think about the people who will cross it.
Beneficiary Designations Supersede the Will
People often think an updated will is all they need. However, the clients will or trust will not override what is named in the beneficiary designation on a life insurance policy, annuity, or retirement account (like an IRA or 401(k) plan). Beneficiary designations take precedence.
Regardless of the client’s current relationship status with the beneficiary on record, and regardless of how the client’s current will reads, the proceeds from the life insurance policy will be paid to the latest person named in the beneficiary designation.
Point #2: The beneficiary is the key to the client’s decision to purchase life insurance in the first place. It is because the client loves the beneficiary that there was even a policy at all.
Best Practices for Reviewing Beneficiary Designations
The process for building bridges with beneficiaries is as follows:
- Help your clients make a chart of three columns.
- In the first column, encourage clients to make a list of each one of their retirement accounts, life insurance policies, and annuities.
- In the second column record the primary beneficiary for each account or policy. (If there are contingent beneficiaries, consider adding an additional column.)
- In the third column record the date the beneficiary designation was last updated.
- Save a copy of each client’s list in a file folder. Label these files by the date.
- Open this folder every month and contact all clients whose annual review is due that month.
- If a client needs to update a beneficiary, help them contact the respective company or companies.
- Seek to build a relationship with each new beneficiary by learning what they mean to the clients. Get introduced to each one.
- Make sure each beneficiary has your name and contact information saved on their phone for quick access should something happen to your client.
All independent financial professionals owe it to their clients to be intentional and consistent in helping them maintain up-to-date beneficiary designations. You can achieve high client satisfaction by automating an annual review of coverages, types of policies owned, status of the policies and the named beneficiaries. You might just keep your client’s loved ones from experiencing a horrible surprise. In addition, a strong process can help you serve your clients and build a bridge to beneficiaries that will lead to future revenue.
If the people who your clients love are the very reasons they sought your help, imagine what your clients will think about you if your business model is designed to keep these people (beneficiaries) front of mind.