When I first entered the life insurance business, my managers preached the following:
“Two things you never talk to clients about: politics and religion.”
This was supplied to be a time-tested guideline that applied to all businesses, not just the insurance industry.
In my career, I have found the opposite to be true: you HAVE to speak to your clients about politics and religion. But like everything else, there is a right way to do it.
In this essay, we will talk about why political awareness is important to the life insurance consumer. Here are a few points to consider:
In the life insurance industry, many different groups have power. Laws are set and enforced by government bodies and regulators at the state and federal levels. Company representatives and industry groups lobby these lawmakers on a daily basis. Aggrieved consumers and tort lawyers take action against carriers. Commissioners and task forces set standards and policies for providers and agents.
Politicians demonize, patronize, or lionize insurance companies, depending on which voters - or special interest groups - they want to favor.
National events such as elections, financial scandals, recessions, natural disasters, and many others, heavily influence how all these parties act. Together, all these forces create the cultural, political, and legal environment in which the life insurance purchase takes place.
One good example is the federal estate tax exemption. For 2020, it is $11.58 million per person. That means an individual can leave $11.58 million to heirs and pay no federal estate or gift tax, while a married couple can shield $23.16 million. States also assess an estate tax.
Many people buy life insurance to pay the tax due, so they do not have to liquidate assets, and can pass on their properties intact to their heirs. This shows how a need for life insurance has been created by tax law.
You can bet that this tax exemption is going to be a key point of contention in the upcoming election. With state and federal governments spending themselves into the 23rd century, in response to the pandemic, politicians are going to be looking at all kinds of ways to make up the shortfall. Depending on how socialist they are, milking the rich could seem pretty attractive.
Even if you are not worth millions of dollars, you have a stake in the outcome of that debate. It all boils down to this: how much of your money does the government think it is entitled to? Whether you have $100 in the bank or $100 million, what gives the government the right to take as much as it wants, just because it can't control its spending?
And, even if you think you should be paying more taxes to “help the needy,” the question becomes: why not just write the IRS an additional check? Why authorize them to force others to pay extra money? What moral code gives you the right to have the government take my property and give it to someone else?
Heavy questions indeed. But they lie at the heart of the politics of our country, and directly impact our finances. They must be addressed.
These discussions are in the background of my conversations with my clients. For sure, when we get down to doing business, it’s only about their financial needs, and which plan and product best meets those needs. But along the way, I like to keep them informed about the big picture that influences the deals we make today. For it’s the political tug-of-war that determines what kind of deals we will be able to make tomorrow.
Every smart consumer should be aware of that.