How to Talk with Clients About Life Settlements

(3 Minute Read)

Many seniors simply aren’t aware that they have an option to supplement their retirement funds through a life settlement. Some advisors aren’t even aware of this option. Those advisors who do know about life settlements are often not completely educated on them. For many seniors struggling to piece together their retirement finances, life settlements can provide a very real value. I want to discuss life settlements and how you can talk about them with your clients.

What Are Life Settlements?

A life settlement is the sale of a life insurance policy to a second party buyer. Life settlements are often sold because a policy owner might not have a need or want for the policy any longer, yet don’t want to completely forfeit the benefit of the policy. In a life settlement, the policy owner sells the policy—and the right to its benefit—for a sum of money that is usually much larger than the policy’s surrender value. The sale of the policy also directs responsibility for premium payments to the new buyer, relieving the seller of the financial burden of the premium.

Many advisors avoid suggesting life settlements because they aren’t fully aware of their legality. In truth, life insurance policies are considered assets, which make them completely legal to market. In many cases, life settlements provide seniors with a financial option for a struggle-free retirement.

How to Talk with Clients About Life Settlements

Some seniors face a harsh financial reality when entering retirement. They face a very real need to liquidate assets and pad their retirement funds. Others simply don’t have a need for their life insurance policy, but don’t understand that they have an option to sell it instead of surrendering it. If you’re working with senior clients, you can begin the discussion.

1. Ask about their life insurance policies
Do they have any existing policies? Take inventory of all policies’ premiums and insured benefits.

2. Is it worth keeping?
Many seniors don’t even bother taking a second look at their current insurance policies. However, having a discussion about whether their current policies are worth keeping and making premium payments on. You might be surprised to find some policies that aren’t necessary anymore.

3. Review options
a. Allow the policy to lapse
Your clients can decide to cease making premium payments, which will result in lapsing the policy. When a policy lapses, the policy owner forfeits all rights to its death benefit.
b. Surrender the policy
The client can choose to voluntarily terminate the policy before its maturity. This results in the insurance company paying the owner a cash surrender value, which is determined by how long the policy has been in-force and how many payments have been made. The surrender value is exponentially less than the policy’s insured death benefit.
c. Sell the policy through a life settlement
The owner can decide to market and sell the policy to a second party buyer and relinquish the responsibility of making premium payments. This also relinquishes the right to the insured benefit. However, selling the policy through a life settlement often results in the seller acquiring a much larger sum of money than the policy’s surrendered value.

When discussing the options your clients have, it’s important that you properly educate them on life settlements and the value that comes with them. A life settlement enables a policy owner to cease making payments on the premium, while also receiving a much higher amount of money than they would if they were to simply surrender it back to the insurance company.

We understand that when it comes to life settlements, you might not understand everything about the process and how it can be done. That’s okay! We’re experts in the life settlement business and would be happy to walk you and your client through everything.

Download our free resource, Serving Senior Clients, for more information about how you can unlock a powerful new source of financial liquidity for your clients today.

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