The Role Of The Insurance Agent

The life insurance agent has a great advantage over the lawyer, trust officer, and accountant in the estate-planning process. Only he can initiate contact with a potential client, while the others, such as the lawyer, must wait for clients to come to them. Thus, the insurance agent has a very important role in initiating the estate-planning process. In addition, he is the expert in analyzing the needs and uses for life and health insurance in the estate plan. Because estate planning involves investment management and tax planning in addition to insurance planning, the insurance agent must be careful not to exercise functions for which he is not technically or legally qualified. 

The insurance agent generally takes the following actions in the estate-planning process: 

1. Gathers information concerning the legal residence of the client, the ages, sex, work, and play characteristics of the family, the family’s assets and liabilities, the current estate plan, and the estate owner’s objectives. 

2. Evaluates the current estate plan in relation to the owner’s objectives. Is there enough liquidity to meet cash needs at death? Do the owner’s current insurance policies provide the income to his family in the desired amount and form? 

3. Designs a plan for accomplishing the objectives utilizing life insurance where appropriate and selecting the best settlement options for the owner. 

4. Tests the plan by comparing its results to the objectives. Perhaps he puts the plan through a hypothetical probate. In any case, one criterion will be flexibility in order that the plan can be changed if the need arises. 

5. Encourages the client to have a properly drawn will. 

6. Reviews the plan periodically. 

When an insurance agent holds himself out as having special skills in the insurance and estate planning areas, he must use due care and reasonable skill in dealing with the estate-planning problems of his client. He can be held liable for not fitting a program to his client’s needs. He can be held liable also for giving advice on matters on which he is not qualified, such as the law. In short, he must not prepare estate plans which embody legal analysis, but he can and should advise his clients as to life insurance requirements, estate taxes, and the tax consequences of different life insurance options.