Is a Life Settlement Right for Your Client?

(2 Minute Read)

As life settlements continue to become more accepted as a viable alternative for seniors with life insurance policies, more trusted advisors are looking into them as options for their clients. One of the first things they ask me is, “How do I know if a life settlement is right for my client?”

The fact of the matter is that life settlements simply aren’t a good option for everyone, and not everyone who applies will qualify for one. But there are a few basic qualifiers that every ideal candidate shares.

Most ideal candidates are seniors aged 65 or older, and have a life insurance policy they no longer want or need. Maybe it’s underperforming, or maybe they have multiples—whatever the case, the need for that particular policy is not there. At this point, they may be considering simply letting the policy lapse or taking the cash surrender value.

If the policy has a death benefit of at least $100,000 or more, and has moved beyond the two-year contestability period, then it’s a good fit for a life settlement. Any of the following types of policies qualify:

  • Convertible term
  • Universal life
  • Whole life (read this article about whole life vs. universal life in regard to life settlements)
  • Survivorship or Joint Life
  • Adjustable
  • Key man or COLI (Corporate Owned Life Insurance)
  • Group life insurance (as long as it is convertible)
  • Trust owned life insurance

Most ideal candidates for a life settlement have a life expectancy of 3-12 years, and have had a change in insurability since the policy was issued. (Please note, however, that the insured is not required to get a physical or visit a doctor for any reason.)

If you’re still unsure about whether or not your client is a good fit for a life settlement, use our qualification calculator.

I would be happy to answer any questions you might have about this, or any other life settlement topic. I can be reached at 888-849-0887 or llagrotte@lsa-llc.com.

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.

LSA QCal

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