Educating Senior Clients about Life Settlements

(3 Minute Read) 

A financial advisor provides their clients opportunities and advice that will help them for years to come. If your client is a senior working towards retirement you want them to know all of their options. There are many options for retirees to consider and helping them can secure their financial future as well as their business with you. Often times, seniors aren’t aware they can sell all or a portion of their unwanted or unneeded life insurance policy, even term insurance. Being able to talk with them in a knowledgeable and candid way is important for any financial advisor. Here’s what you need to know about life settlements in order to give your clients all their options.

What is a Life Settlement?

A life settlement allows someone to sell all or a portion of an existing life insurance policy for more money than the cash surrender value and less than the death benefit of the policy. Basically, your client sells the death benefit of the policy, with the added reward of getting rid of premium payments. Seniors will lapse or surrender their life insurance policy because the need for the coverage is gone or the cost to keep the policy in-force is cost prohibitive.

How to Talk to Your Clients about a Life Settlement

As you go over your senior client’s portfolio, there are a few questions you can ask to guide your conversation concerning their current life insurance policies and their ability to sell all or a portion of their life insurance policy.

  1. What do they know about their life insurance policies?

What policies do they currently have? If they have one or more, take stock of the what they pay in premiums as well as what the insured benefits are.

  1. Is a policy worth keeping?

In reviewing these policies with your client, you may find that a policy just doesn’t make sense any longer. Maybe your client is working to keep a budget on a fixed income and can’t truly afford the premium payments. Maybe your client has several policies or enough wealth saved that a life insurance policy they’ve kept for years is now a drop in the bucket. In these situations, it might not make financial sense to hold onto these policies.

  1. What are their options?
  • They can allow their policy to lapse.
    If you and your client identify a policy that is unwanted or unneeded, one option would be to simply stop making premium payments, which will cause the policy to lapse and effectively terminate.
  • They can surrender their policy.
    If your client chooses this option, the insurance company will consider how long they have held the policy and how many payments have been made. They will get some money in return, but it will be exponentially less than what they could get if they go with the life settlement approach.
  • They can sell their policy and receive a life settlement.
    The third option for your client would be to explore the life settlement market. If they qualify, they could sell all or even just a portion of their policy for more than the surrender value and receive an immediate cash payout. That way, they still benefit from their valuable life insurance asset—but without having to pay premiums in order to keep it. Should they decide to keep some of the policy as it is, they can sell only a portion.

Educating senior clients on life settlements is one way to ensure they have all the information they need to plan for retirement. We will talk you through the process so you know what to expect and if it makes sense for your situation. But to start, our life settlement calculator is a great way to help your clients evaluate whether life settlements might be an option for them. If you have any questions about a life settlement, contact Life Settlement Advisors today.

Case Study: Joseph and Carol bought a joint survivorship life insurance policy for federal estate tax purposes several years ago. Joseph recently lost Carol to cancer and the need for the coverage is no longer there. Joseph sold his policy and used the funds to pay off the medical bills and supplement his retirement. 

Leo LaGrotte
Life Settlement Advisors
llagrotte@lsa-llc.com
1-888-849-0887

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