Whole Life Settlements

Whole life insurance policies are a option when purchasing permanent life insurance. However, there are some situations where your client may no longer have the need for the policy. It may be that the policy is simply underperforming, or perhaps the situation that called for the policy is no longer valid. Whatever the reason, it simply doesn’t make sense to continue paying the premium on a whole life policy that’s no longer needed.

A great thing about whole life insurance is that it endows: there will always be cash surrender value. So if your client no longer needs the whole life insurance policy, the most obvious option may be to surrender the policy and collect the cash value.

But many advisors don’t consider a life settlement. A life settlement allows the insured to sell the policy to a third party. In return, the insured receives a lump sum of cash. Because a whole life policy can build up significant cash value, it may not always be a good fit for a life settlement, but in some situations—like a young policy, for example—the lump sum could be greater than the cash surrender value, which would provide your client with greater liquidity for more relevant investments.

Some whole life policies come with term riders. If those term riders are convertible to universal life, they become an even greater option for a life settlement.

A life settlement is a great opportunity for some whole life policies, and is worth investigating. If you have a client with a whole life policy, and want to see if it’s a good option for you, use our qualification calculator.

      

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