When Helping A Client Evaluate Settlement Offers, Quality Counts
If you want to help clients sell unwanted life insurance policies, you should learn to look past the superficial dollar value of life settlement offers, to evaluate all of the many subtle factors that help determine the offers true value.
Suppose your client, Jane Doe, gets what appear to be 2 firm offers for a life insurance policy that has a cash value of $40,000. One offer is for $160,000, from a life settlement firm you know well, and the other is for $200,000, from a firm located by your clients brother-in-law. Which offer should you advise your client to accept?
An inexperienced advisor might say the bigger offer is always the best value. Is that really true?
Of course not.
Jane Doe may already know, deep down, that price can be an unreliable indicator of value.
Maybe her brother-in-law is the same guy who got her a “bargain” room in a hotel that turned out to have shared bathrooms and no hot water. He was also the one that got her a “better” price on a used car, a car that turned out to be a lemon.
But, even though Jane Doe knows that a great price can mask serious problems, she might have a hard time applying that knowledge to life settlements. For her, the life settlement market is a totally new area.
When your client asks for help weighing 2 firm offers, what do you say?
Depending on the circumstances, you might say something like this:
“Ms. Client, I have a fiduciary responsibility to you. That means I am on your side. I want what is best for you. I have a list of reasons why, in a life settlement, a lower dollar number might actually be the higher value. In other words, the $160,000 offer may actually be a better value than the $200,000 offer. Lets go through my list.”
Here is a list of 6 points that you might include in your discussion.