DIVERSITY, EQUITY, & INCLUSION
Tips for LGBTQ+ Clients When Purchasing Life Insurance
By Stephani Niblock
“Nope.” Years ago, this was my husband’s response when a life insurance company requested additional medical information for his pending application and there was nothing I was able to do to change his mind.
Before I came into this sector of the financial industry, my husband needed a new life insurance policy, and getting him to apply in the first place was a challenge, but when additional medical information was requested, he flat-out refused.
Why was he so adamant about not releasing those records? He is transgender and was not comfortable with releasing that information. This is one of many reasons why this topic is so important to me and why I am glad you are taking the time to read this article so we can change the perceived landscape together.
As you know, purchasing life insurance is a crucial financial decision for everyone, regardless of sexual orientation or gender identity. However, only 42% of LGBTQ+ individuals have life insurance,1 which may be due to the unique challenges they face when it comes to securing the appropriate coverage for themselves and their loved ones. In this article, we will discuss some essential tips for LGBTQ+ clients to consider when purchasing life insurance.
1. Choose an LGBTQ+-friendly insurance company and agent: Not all insurance companies are created equal, and some may not have the necessary knowledge or experience to serve the LGBTQ+ community. It's essential to choose an insurance company and agent with a proven track record of supporting LGBTQ+ clients and their needs. Do your research, read reviews, and ask for referrals from other members of the community.
2. Walk your transgender and non-binary clients through the underwriting: To help your clients feel more comfortable with the information required to process a life insurance application, you or your client should ask your insurance agent what the insurance company’s specific policies for underwriting non-binary or transgender individuals are based on where your client is at in their transition.
Companies that are more friendly in transgender issues include Nationwide, Prudential, Mass Mutual, New York Life, and Northwestern Mutual, to name a few.
Your LGBTQ+ clients may be nervous about the process but knowing they are working with an affirming company and what to expect during the application process can help ease their nerves. Each company has different processes, so pull your life insurance agent into this conversation if needed.
While your client cannot be denied insurance for being transgender or non-binary due to discrimination laws, some clients may feel particularly vulnerable during the life insurance application process (as in my husband’s case).
Your client’s stage in the transition process will often make a difference in how the underwriting process goes. If they have surgery planned, most insurance companies will not offer coverage until after the surgery is completed due to its medical risks. If your client has just started the transition process or is non-binary, most insurance companies will underwrite the policy as the gender assigned at birth. If your client is post-transition, some insurance companies will underwrite as the identified gender.
3. Consider the type and amount of coverage your client needs: Life insurance policies come in various types and amounts, and the right one for your client will depend on their individual circumstances. For example, if they have dependents, your client may need a more comprehensive policy that covers funeral expenses, outstanding debts, and ongoing expenses like mortgage payments and childcare costs. On the other hand, if your client is single with no dependents, a smaller policy may be sufficient. The life insurance agent you work with will help your client through these details.
4. Understand how your client’s health history and lifestyle can affect coverage: Insurance companies will look at health histories and lifestyle factors, such as smoking or hazardous hobbies, when determining your coverage and premium rates. LGBTQ+ individuals may face additional health risks, such as higher rates of depression and anxiety, which can impact coverage. Encourage your client to disclose all relevant information when quoting coverage to avoid any surprises down the road. Insurance companies will also likely need any name changes in the last seven years.
5. Consider adding riders to your policy: Riders are additional benefits you can add to your life insurance policy to customize it to your needs. LGBTQ+ clients may benefit from riders such as accelerated death benefits, which allow you to access a portion of your death benefit if you are diagnosed with a terminal illness, or long-term care riders that provide additional coverage if you require long-term care, which is a substantial need for most LGBTQ+ individuals.
6. Review the policy regularly: It's essential to review your client’s life insurance policy regularly, especially if there have been any significant changes in their life. For example, if your client gets married, has a child, or is making more money than they used to, they may need to increase their coverage.
7. Consider potential tax advantages: If your LGBTQ+ client does not qualify for a Roth IRA because they exceed the IRS income limits or are married but file their taxes separately, some policies such as universal life insurance (IUL) or variable life insurance (VUL) policies could be a potential vehicle to grow assets in a tax-free manner. However, these policies need to be well understood and properly funded, so make sure to work with a reputable insurance agent who has your client’s best interest at heart.
In conclusion, purchasing life insurance is a vital step in securing the financial future of your client and their loved ones, and it's essential to take the time to find the right coverage for their unique needs. LGBTQ+ individuals may face additional challenges when purchasing life insurance but by following these tips and working with an experienced agent, you can ensure your clients have the coverage they need to protect their loved ones and achieve their financial goals.
1. LGBTQ Finances: A Survey of 2,000 Americans | The Motley Fool
Registered representative of, and securities and investment advisory services offered through Hornor, Townsend & Kent, LLC (HTK), Registered Investment Adviser, Member FINRA/SIPC, 600 Dresher Road, Horsham, PA 19044. 800-873-7637, www.htk.com. HTK is a wholly-owned subsidiary of The Penn Mutual Life Insurance Company. Pride Alliance Financial Services" is unaffiliated with HTK. HTK does not offer tax or legal advice. Always consult a qualified adviser regarding your individual circumstances.
The cost and availability of life insurance depend on factors such as age, health, and the type and amount of insurance purchased. Before implementing a strategy involving life insurance, it would be prudent to make sure you are insurable. As with most financial decisions, there are expenses associated with the purchase of life insurance. Policies commonly have mortality and expense charges; if a policy is surrendered prematurely, there may be surrender charges and income tax implications. You should consult a qualified tax professional for tax advice on your own personal situation. All guarantees are based upon the claims-paying ability of the issuer.
Optional riders and benefits may be subject to eligibility requirements, additional premium requirements and/or minimum or maximum coverage amounts. Availability and rider provisions vary by each state.
Stephani Niblock, president of Pride Alliance Financial Services, Inc., is an independent agent dedicated to fostering LGBTQ financial empowerment. With life, health, LTC, and securities licenses, she tailors her approach, creating a secure space for self-discovery and financial growth.
image credit: istock.com/Nadzeya Haroshka