What You Need to Know
- The first thing to look at is whether the policy comes with a conversion option.
- Another factor to consider is any time constraints.
- The age and health of the insured also matter.
Many financial professionals and their senior clients over the age of 65 may not be aware that term life insurance policies (if convertible) may be sold in the secondary market for a substantial cash payment.
A life settlement for a term policy that has a conversion option to a universal life policy prior to expiration can be a smart exit strategy for qualifying seniors who no longer need the coverage but who want to optimize the policy’s monetization potential.
If you are a financial professional whose senior clients own term life policies nearing expiration, you owe it to your clients and to other advisors in your referral network to inform them of the life settlement option. Otherwise, many seniors will simply allow their term policies to lapse — not realizing such policies may provide a cash windfall.
Before your client’s term conversion privilege expires, it’s in their best interests to determine whether he/she qualifies for a life settlement.
To illustrate how agents are helping their clients benefit from selling their unwanted term policies, we’re providing a summary of five case examples recently brokered by our firm. 1. Retired Business Owner
Having been diagnosed with several health issues, this 77-year-old retired business owner wanted to optimize his cash assets in order to travel and enjoy quality of life with his family. His insurance agent conducted a thorough review of his business-owned life insurance coverage and spotted an opportunity to generate a cash windfall for his client that involved a term life insurance policy. After converting and selling the policy, the client and his family were thrilled to receive $600,000 for an obsolete policy that had no monetary value.
2. 65-Year-Old Insured With a Serious Illness
The 65-year-old insured needed cash for expenses after being diagnosed with a disease that shortened his life expectancy. His agent spotted an opportunity to generate cash from an unwanted term policy. The 60-day conversion deadline for the term policy was approaching but the insured could not afford the $110,000 premium for the new universal life policy required for the conversion. We were successful in quickly negotiating a term-conversion life settlement for $880,000.
3. A Couple Affected by Alzheimer’s