The Client’s Best Interest in Life Insurance

Life insurance is a unique and important financial product for many clients best interest and the only product that can protect clients’ families and businesses against the risk of early death. Properly designed life contracts also allow the client to benefit from some unique tax benefits afforded only to life insurance products. But standards for life insurance advice have not kept pace with the marked increase in types of life products or the complexity of these products. Most state insurance regulators have not modernized consumer protections or duties to clients to keep pace with protections offered by banking regulation, securities laws, trust laws or pension laws where greater duties are owed to clients both when a recommendation is made and on an ongoing basis. Many complex modern life products involve important tradeoffs that are not well understood by consumers or perhaps by most agents who sell them. Nor is there any ongoing requirement to monitor and advise the client after the product is placed. This white paper will explore how two upcoming changes may bring life insurance standards into the modern era.

There are two important developments in 2019 that will impact the standard by which life insurance recommendations are made to clients. The first was the CFP Board’s change in their Code of Ethics and Standards of Conduct (“Code and Standards”). The new standards now extend to any financial advice including all life insurance recommendations. These recommendations must now be in the client’s best interest and advice about them offered under a fiduciary standard.

The Life Insurance Design Questionnaire® is designed to help life insurance producers gather the information that can help them make product recommendations that comply with the best interest standards described below.

Reproduced with permission.  Copyright The National Underwriter Co. Division of ALM

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