When Is a Good Time to Talk With Clients About Life Settlements?
Change may create a need for coverage, and change may create a reason to drop coverage.
By now, you may know that 500,000 older Americans a year will lapse their life insurance policies.
You may also know that it is because they no longer want, need, or can afford their policies and do not know there is another option.
Sometimes, a life insurance policy outlives the purpose for which it was purchased.
Over the course of five, 10, 20 or even 30 years, circumstances can change, and the reason for the purchase of the policy is no longer a concern.
But when is a good time to speak with clients/?
The following can be appropriate times to evaluate whether your client’s life insurance policy still fits your client’s needs, and bring up the option of life settlements, if your client’s circumstances warrant it.
Annual Review
Meeting with your clients annually to review their financial goals and progress is a good time to evaluate assets, including their life insurance policies.
Perhaps a universal life policy is imploding or blowing up, and putting more money into the policy no longer makes sense. Perhaps a term policy is coming up to the end of the term or the end of the conversion period.
The client may not want to convert the policy, or may decide to convert only part of it.
Have Life Circumstances Changed?
If you have a client who informs you that their spouse has died, or the house is now paid off, or the children have left the house, or a business or other large assets have been sold, these can all be circumstances in which a life insurance policy may no longer be necessary.
Has Your Client’s Budget Changed?
Perhaps they have retired and are now on a fixed income.
Perhaps there has been a change in estate value.
Policies may no longer fit into a retirement budget (and income replacement is no longer needed), or policies purchased for estate tax purposes may no longer be needed due to an estate value decrease or increase in the estate tax exemption.
Is Your Client Ready to Lapse or Surrender Their Policy?
A client may call and tell you that they are just “done” with the policy.
They may want to surrender the policy, or may have been offered an enhanced surrender option from a carrier.
Looking into a life settlement may bring greater financial value for your client, as settlements generate three to five times the cash surrender value.
And as mentioned above, term policies can be sold, truly bringing value for an asset that has no inherent cash value.
Looking for Funding for Long-Term Care Costs?
Is your client looking for ways to fund assisted living, memory care, home care, etc.? Evaluating a life insurance policy makes sense.
Does the policy have living benefits such as accelerated death benefits, critical illness or long-term care benefits?
What happens if the policy does not have these provisions?
Selling a life insurance policy may bring the needed funding and support for clients.
A ‘Win-Win’ Solution
A life settlement generates cash from an asset that your client probably does not know they have, thus generating “found money.”
Clearly, this is a win for your clients, and also for you.
Besides fulfilling your fiduciary duty to your clients, life settlements help your business as well.
There is a revenue opportunity from the sale, as well as potential for further product sales and assets under management.
Referral Sources: Centers of Influence
Besides helping your current clients, life settlements can also be a good way to assist and attract new clients, expanding your business.
A wide array of professionals in your current network may have clients that can benefit from a life settlement, and they need your assistance.
In particular, elder law attorneys, CPAs, charitable organizations, fiduciaries, health care organizations, insurance agents and reverse mortgage professionals all have clients (or donors in the case of charitable organizations) that may be able to benefit, and directly benefit their businesses as well.
To be clear, life settlements are not for everyone.
But if you and your client have decided that a policy is no longer wanted or needed, and the decision has been made to lapse or surrender the policy, a life settlement can offer significantly greater value.
If you are not speaking with your clients about life settlements, someone else may be.
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(Photo: Panimoni/Shutterstock)