The life settlement market provides policy owners with the opportunity to monetize an unwanted life insurance policy for typically more than the cash surrender value while, at the same time, giving the producer a new commissionable product.

However, the life settlement sales cycle can become a long and frustrating experience for those unfamiliar with the process, causing clients to walk away from great opportunities and a loss of revenue for the producer. If that happens, it can hurt client relationships and lead to producer dissatisfaction with the life settlement market, ultimately making the opportunity unavailable to clients with a future potential life settlement.

See also: Plenty of life settlement opportunities, post fiscal cliff

Education and strategic planning can help producers, though — shortening the length of a life settlement transaction and possibly generating a higher offer on the life insurance policy, creating happier clients in the process. Once a life insurance policy that fits the life settlement purchase criteria has been identified, the producer can take steps to create a quick and successful experience.

Step one: Fully explain the timeline associated with the life settlement process to your client. For example, ordering medical records can take up to six weeks — with another one to two weeks for the life expectancy companies to issue the LEs. This can be a frustrating wait for clients who are not made aware of this ahead of time. Educating clients about life settlements is a key strategy to maintaining their happiness during the entire life settlement process.

Step two: When having these early discussions, it is an opportune time to discuss potential future premium payments. Once the life settlement process starts, the client should only make the minimum premium payment needed to keep the policy in force. If there is a large enough cash surrender value then the client may be able to stop making premium payments altogether. On the other hand, if there is little to no cash surrender value, the client should be aware of, and comfortable with, making payments during the length of the life settlement process. Since most insurers will not change ownership of a life insurance policy that is in grace, it is important to remember that life settlement providers will not typically complete a transaction if the policy is in grace.

Step three: Get the entire family involved in the discussion during the early stages of the process. When it comes to executing life settlement contracts, different family members need to be involved, whether they are the beneficiaries of a trust or designated contacts for the insured. It is important to start this discussion early in the process.  Questions and concerns from family members should be addressed before time and money have been put into executing a life settlement.

Step four: Prep carrier documents beforehand, regardless of how the file will be brought to market (whether through a life settlement broker or working directly with life settlement providers). Taking this step can cut down on wasted time during the valuation process. The majority of life settlement providers require similar carrier-generated information, but as everyone knows, the turnaround time for document requests can vary greatly from carrier to carrier. Reducing the risk of gathering additional documents during the final stages of the life settlement process is an efficient tactic to quickly complete the transaction and maintain a happy client.

One of the most important documents required by life settlement providers, in order to complete initial valuation, is an in-force illustration with level premiums and account values/cash surrender values to age 100 (or maturity). Without this illustration, the insurance policy may not receive an offer or may be undervalued. Along with the illustration, the life settlement provider will likely need a current verification of coverage (VOC), annual statement and premium history to complete the transaction. By obtaining these in conjunction with the medical records, the producer is able to cut down on both the initial valuation and total life settlement transaction time.

Life settlements are a great way to provide an alternative to surrendering an unwanted policy. Client education about the intricacies of the life settlement process in conjunction with efficient document procurement will minimize the life settlement sales cycle and create a much happier client experience, ultimately giving the producer a positive experience to share with other clients who might benefit from life settlements.


For more from Adam Meltzer, see:

Why you should take another look at the life settlement industry

Retained coverage insurance settlements: The life settlement industry’s newest product