Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Unhappy older couple

Life Health > Life Insurance > Life Settlements

Ignorance About Life Settlements Can Be Scary

Your article was successfully shared with the contacts you provided.

What You Need to Know

  • Clients have been selling life insurance policies to investors for more than 20 years.
  • One common client objection is… murder.
  • The authors contend that the real threat to your clients is… loss of policy asset value.

It is a fact that lack of consumer knowledge can mean missed life settlement opportunities.

Each year millions of policies get lapsed or surrendered without ever being evaluated for a life settlement, often because the consumer is unaware that the industry even exists.

This lack of knowledge leaves millions of dollars on the table.

But that is not the only way that consumer ignorance of life settlements impacts our industry and, even more meaningfully, it affects individuals.

An Example

Here’s an example how lack of knowledge played a key role in a case this month:

A recently widowed, relatively healthy 76-year old with a $500,000 universal life policy felt she could no longer afford the premiums.

She had no children and therefore no real need for the coverage.

The client had never heard of a life settlement, but her astute agent brought us this case to evaluate.

We were able to obtain an offer of $100,000 for the policy which had a cash surrender value of about $20,000.

Some Stranger

In an unfortunate case of the “blind leading the blind,” during the bidding process the widow mentioned the life settlement idea to one of her nieces, who also never heard of a life settlement.

The niece put a scare into the widow by remarking that, “I wouldn’t want some stranger benefiting from a life insurance policy on my life!”

We don’t hear this objection very frequently anymore, but it came up quite often about 20 years ago in the early days of life settlements. Back then, it was a reasonable concern.

But now, after years of doing business in a highly regulated industry, we forget that there are still people hearing about life settlements for the first time.

And these people raise the same concern as when life settlements were new because life settlements are new to them.

How Things Work Now

People who are just now hearing about life settlements don’t know that providers are licensed with the states by the same insurance departments that regulate life insurance.

They don’t know providers administer policies for investors and that they keep the insured’s names confidential.

They also don’t know that a murder has never been attributed to a life settlement!

While people have been murdered for life insurance proceeds, inevitably, the killer is a relative or business associate of the insured.

The Outcome

Fortunately, the agent helping the widow was able to address the widow’s concerns and got her a considerably better result than just surrendering the policy.

But ignorance of life settlements almost cost this widow dearly.

As a financial advisor, shouldn’t it be your responsibility to let your clients know that before they lapse or surrender a policy, that there might be a better alternative?

Robin Weinberger and Peter KatzRobin S. Weinberger, CLU, ChFC, CLTC, is the director of national accounts for Life Insurance Settlements Inc. She has been a general agent and director of national accounts for Connecticut Mutual and vice president of marketing for Sun Life of Canada. She can be reached at [email protected] or (617) 451-3343.

Peter N. Katz, JD, CLU, ChFC, RICP, is a life settlement broker and co-director of national accounts with Life Insurance Settlements. He is also a consultant specializing in life insurance advanced sales illustrations, and he has served as an advanced markets attorney and in product development. He can be reached at [email protected] or (860) 937-2936.



(Image: Shutterstock)


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.