When are Life Settlements Needed?

In my previous article, I spoke about how both you and your clients can benefit from life settlements. Though the advantages seem too good to be true, there are real-life situations where your customers stand to gain more through life settlements than they would retaining an outdated life insurance policy.

 

Here are a few examples of these conditions:

 

  1. Personal Circumstances
  • When a lapse or surrender is contemplated, and examining all options is in your best interest
  • When your client’s policy becomes too expensive, or if it hasn’t performed as illustrated or expected
  • When the beneficiary predeceases the insured
  • When your insurance has outlived its usefulness or intended purpose
  • In case a divorce, disability, or a need for long-term care arises
  • Or even when you simply wish to receive and enjoy or invest the proceeds of your life policy

 

  1. Business Settings
  • If buy/Sell agreement funding is no longer required
  • If key employee policies are due to termination, company sale, etc.

 

  1. Estate Planning
  • When individuals/trusts acquire policies for tax liability
  • Sometimes changes in the law eliminate the need for many policies
  • Further enhanced life settlement as a viable option
  • If the insureds are terminating clients to retain future premiums and recover policy values

 

  1. Charitable Giving

The client might wish to endow their favorite non-profit(s) with the money from their life policy. In this case, the insured often learns that they can retain a portion of the proceeds and gift the balance to his or her charity of choice! Coincidentally, many charities already own previously gifted life policies, so this option is quite common. In this case, the charity organization also assumes responsibility of the premiums for the life policy. This takes the pressure off of your clients, especially if their premium payments are becoming burdensome. The sale of their life policy will eliminate that issue by giving the donor immediate funding. Here’s an insider tip: It’s not unusual to generate more money through gifting a life policy to a charity than fundraising at a gala!

 

  1. Professional Centers of Influence

We’re all aware how much control is in the hands of professional advisors; Advisors have a fiduciary responsibility to inform clients of options and alternatives. What happens quite frequently is that CPAs/Attorneys aren’t familiar with life settlements, so they typically don’t mention them to their clients. Once the advisors have seen the positive impact and benefits that life settlements offer, they accept them with open arms!

 

  1. Term Life Insurance

A lot of convertible term is on the books, which means most of it will lapse unfortunately so your insureds need to have options lined up in order to take full advantage of their life insurance. At renewal insureds reach a decision point, do they:

  • Let the policy lapse for no value
  • Keep it and pay higher premiums
  • Convert it to permanent coverage
  • Or sell the policy in a life settlement transaction if qualified

 

If you just don’t know how to start a conversation about life settlements, here are some short introductions that I have used to  encourage numerous reps throughout the years:

  • [Insert their name] . . . I was thinking about you recently
  • Given numerous client requests and my own experience, we’ve added a Life Settlement Division to our portfolio
  • Our in-house settlement professional has 40 years of experience & works closely with our clients/donors
  • May I have your permission to tell Marc about your situation?
  • If it appears we may be able to offer a better solution, shall I set up a meeting for the 3 of us?

 

If you’re interested in seeing more real-life examples of how life settlements have benefited agents and their clients, check out this info page.

 

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