Like all financial products, insurance is undeniably intertwined with your client’s cash flow. However, reviewing a client’s cash flow isn’t a typical step for many in their insurance needs analysis. Instead, most of the time, the client’s income and outstanding debts are used to ascertain the amount of insurance needed to cover cash flow for a client’s dependents in the event of an untimely death. This approach is better than nothing, but could be less accurate. And it’s not as effective at having the client take ownership of their insurance needs.

Cash flow data isn’t only important on the needs analysis side; it’s a major factor in the client's ability and willingness to afford the insurance recommendation. How often does a client feel they are unable to afford to follow all of your insurance advice? How often is your client potentially unwilling to follow your insurance advice because of what they perceive they’ll have to give up to cover the premiums? 

A cash flow plan can make including expense data in your needs analysis process easier and faster. It can also help you show a client how they can afford to follow your advice, without harming their day-to-day cash flow. Here are the five ways a cash flow plan can help when it comes to your client’s insurance needs.

1. Supports the needs analysis 

Collecting expense data as part of a cash flow plan can make it easier to complete an insurance needs analysis for your clients. Your clients will be more comfortable and more likely to share their total debts and expenses, which will provide you with the data needed to uncover their true insurance needs.

2. Helps uncover creditor insurance

You’ll get a much clearer picture of client debts. Make sure you have your client check for creditor insurance premiums hidden in their various debt statements. Get your clients to double check car loans and lease paperwork, in particular. Sometimes the client was actually loaned a lump sum for the insurance coverage for the entire loan or lease period, and they are paying interest on that too. 

Creditor coverage can really add up. You may be able to show your client that they can cover some, or all of their insurance needs using the funds they are currently paying to various creditors. Sometimes they may even be able to reduce their overall insurance costs, which allows their cash flow plan to free up even more money to fund their goals. 

3. Shows them how to afford your recommendations

Most cash flow plans will show positive money found. This gives you some clarity on how much free cash flow the client can put towards their financial goals each month, including their insurance needs. 

Sometimes, you’ll see a very low money found number. This helps you spot an issue with the client being able to maintain their insurance. No one wants a client to be unable to keep up with premiums shortly after purchasing their policy. When you find low, no, or negative money found, you can test refinance strategies to see if you can find the money to help your clients fund their insurance needs, and other financial goals. This can help a client who couldn’t afford to take any of your advice  act on some, or all of your recommendations.

4. Consequences of under insuring are clear

When a client has a cash flow plan, most of their money has a job. It’s easier for them to see how the loss of one person's income would affect them, and how quickly that could happen. Using our simple cash flow-based insurance estimator tool (get access by attending the webinar mentioned below), you can allow your client to see why they need the insurance they need, and how fast they’ll run out if they are underinsured. 

5. Helps clients afford to convert to permanent policies

The sooner a client has a cash flow plan, the better. Converting to permanent insurance can increase your client’s premiums, and it’s easier for them to make the decision if they can clearly see how it will impact their cash flow. Whether you’re starting a client on their cash flow plan later in life when they are looking to convert their insurance, or earlier in life, well before they plan to consider the switch, this type of planning will make it easier for your clients to afford those premiums.

If you give any sort of insurance advice, you should give cash flow advice too! Even a small investment of effort to give your clients easier ways to manage their spending can ensure they can afford to take your advice for many years to come.

Want to see cash flow planning for insurance needs in action? Register for our upcoming webinar

About CacheFlo

CacheFlo is a financial education company that builds eLearning and tools to help financial professionals and individuals make behaviour-based changes, which allow them to get more life from their money. We want to make it easier for people to predict the impact of their financial choices before they make them.

About the Certified Cash Flow Specialist (CCS) program

CCS professionals go through enhanced cash flow-based training to develop the skill set to deliver behaviour-based cash flow advice. They start the financial planning process with a cash flow plan to genuinely help their clients get more life from their money.

About the Financial Capability Program (FCP)

The FCP combines quick and practical lessons with tools, including Winton, which helps people make financial changes they can stick to. Users can apply what they've learned to their financial situation, thus bridging the knowing-doing gap. The goal of the FCP is to help people get more life from their money.