By its very nature, term life insurance is extremely affordable, mostly because the possibility of a death benefit payout is more limited than with other policies. Many consumers still view term life coverage as more or less disposable — that is, they purchased a term policy to provide coverage, such as income protection, knowing that the policy was set to expire at a specified time.
In fact, far too many insurance and financial professionals agree with the supposition that term insurance might as well be lapsed as soon as the initial need for the coverage passes.
Other advisors, however, are learning that there is no reason to lapse a term policy.
In the increasingly robust life settlement arena, term policies represent a significant portion of the market. That should be no surprise, given that more than $1 trillion in new term policies is issued annually. Add to that the fact that the vast majority of term policies never pay a benefit, and you can see the opportunity for smart consumers and their advisors.
Just within your existing book of business, there are likely a number of term-to-life settlement scenarios waiting for you. Many of these will be individuals who would appreciate knowing that their investment in a policy is not for nothing. If they are nearing the end of the term and no longer need the policy, you can facilitate a life settlement and help them realize a benefit — in other words, a cash settlement — where they thought there was none.
Or perhaps they will need further coverage. In that case, you can help them by not only transacting a life settlement on their current term policy, but by helping them to re-invest the proceeds in a newer, better performing term policy, or even in a permanent policy. As you may know, settlement proceeds can be used for any purpose.
Your clientele may also include corporate executives whose term policy needs are even more likely to change. For instance, a corporate client might convert part of a policy and benefit from a term life settlement on the remainder of the policy. Or, perhaps they would benefit from a term life settlement on the entire policy, whether or not they use some of the resulting proceeds to purchase new coverage.
It’s worth noting that settlement scenarios will often require that you and your client convert a term policy to a universal life policy before settlement. Thus, you would receive a new commission on the conversion and would stand to benefit from the settlement. Your compensation should not be the reason for informing clients about settlements, but it is important to realize that you stand to benefit.
Many agents have gained not only the appreciation of individual clients that they have helped with a term life settlement. These same agents can find an appreciable stream of steady business from just a handful of corporate clients who, from time to time, need help with both policy conversions and life settlements.
Other insurance and financial professionals grow their business by teaming with accounting and law firms. By doing so, you can partner with these other advisors, helping them identify term life settlement scenarios. You may also be called upon to help appraise policies that are good candidates for settlements and to help write other policies, term or otherwise, for their clients.
The possibility of a life settlement can increase the value of any life policy, including term. When you have a client — individual or corporate — who is considering buying a policy, you can add instant value to that coverage and increase the likelihood that your client will make buy.
M. Bryan Freeman is founder and president of the life settlement provider Habersham Funding LLC. He can be reached at 888-874-2402 or email@example.com.