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: