Close Close

Life Health > Life Insurance

Sifting Your Book Of Business For Life Settlement Prospects

Your article was successfully shared with the contacts you provided.

Sifting Your Book Of Business For Life Settlement Prospects


What if your financial advisor persuaded you to get an appraisal on your home just for laughs and the appraisal reported a true market value at 3 times the expected value?

You would be happy.

If you are a financial advisor, you might be able to make some of your own life insurance clients equally happy by looking to see whether some of them are potential life settlement candidates.

The best way to start is by reviewing a list of policyholders who seem likely to surrender their policies or let the policies lapse.

If a client is going to lapse or surrender a policy, an advisor has a moral obligation to recommend a more valuable alternative. There are many circumstances in which a client might lapse or surrender a life insurance policy. (See chart for some typical reasons.)

Another way to qualify your client for a life settlement is to conduct a quarterly review of policies covering the lives of senior insureds. For example, some minimal criteria require the policys face value to be in excess of $250,000 and the age of the insured to be 65 or older. Recommending an evaluation of an existing life insurance policy is a great way to reach out to your current clientele and further strengthen your producer-client relationship.

In a recent case, a 72-year-old female was surrendering a $2 million universal life policy with less than $200,000 in cash surrender value. The policy was evaluated and sold with $500,000 paid to the policy owner. Coverage was replaced with a $2.5 million policy with lower premium costs.

The client was better off, and the agent was compensated well. The agent received:

A 10% commission on the settlement value.

Continued residual commissions on the policy that was sold (policy still in force).

Premium commissions on the new, more appropriate policy.

Financial advisors also should think about the life settlement market when they are proposing a 1035 exchange for any policy insuring the life of a senior age 65 or older. An advisor may propose such an exchange when a client needs more life insurance to cover a growing estate.

An existing policys settlement value produces a current market value that could be worth more than 3 times to 10 times the size of the policys cash surrender value. The client can use the extra cash obtained through a life settlement to pay for a more affordable life insurance contract. The new contract is typically a survivorship policy.

Of course, clients thinking about making major changes in their estate plans and life insurance policies should talk to their tax advisors first.

When reviewing your book of business for life settlement prospects, you should be talking to an experienced life settlement broker. A broker at a firm with a good, in-house compliance department can help you avoid prospecting pitfalls by advising you about your states laws and regulations. One way to gauge whether a broker is serious about compliance is to see whether the brokers firm is a member of the Viatical and Life Settlement Association of America, Orlando, Fla.

A good brokerage firm also can give you up-to-date advice about what licensed life settlement “providers” (buyers) look for in a policy.

Be sure to look for a life settlement brokerage that offers solid training, including seminars that provide continuing education support, and marketing support, such as marketing materials and advertising deliverables that can simplify the process of telling life insurance policyholders about the life settlement market. Each marketing tool should include a case qualifier form that can help you determine quickly whether a consumers life insurance policy qualifies for an evaluation.

is chief marketing officer and managing principal at Life Asset Group L.L.C., Miami Beach, Fla. He can be reached at [email protected].

Reproduced from National Underwriter Edition, April 29, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.