Orphaned Life Insurance Policies Can be a Life Settlement Goldmine

What You Need to Know

Baby boomer agents retiring.
Many of the life insurance policies they sold are still in place.
Some of the policies have nothing to do with the current needs of the owners.

In recent times, the insurance sector has experienced a significant shift.

As many baby boomer agents begin to retire and with the downturns brought about by economic strains and the pandemic, a sizable void has been left in the market.

This situation begs the question: What happens to their existing policies?

The answer: Many life insurance policies, perhaps hundreds of thousands, become orphans.

Understanding Orphaned Life Insurance Policies

An orphaned life insurance policy, sometimes called an unassigned policy, refers to any active life insurance policy that lacks an agent overseeing and servicing it.

This could be because the agent who initially wrote the policy may have retired, passed away, or simply lost touch with the policyholder.

Why Orphan Policies are a Goldmine

Potential for new business: Statistically, most people who buy life insurance will purchase multiple policies throughout their lives.

Thus, an orphan policyholder will likely be a candidate for future financial opportunities.

Ideal for life insurance settlements: Orphan policies tend to skew older, which aligns perfectly with life insurance settlements that are predominantly tailored for senior clients.

Reduced risk of lapsing: Neglected orphan policyholders are more prone to letting their policies lapse.

By reaching out to them, agents can decrease this risk and simultaneously present them with more suitable coverage options, including a free policy appraisal.

Strategies for Marketing to Orphan Policyholders

Identification and outreach: Agents should collaborate with their principals to pinpoint orphaned policies and then systematically market to them.

Initial efforts should focus on establishing contact and converting them from lost orphans into genuine prospects.

Assessing needs: Once contact is made, it’s vital to ascertain if the policyholder’s needs have changed since they first acquired the policy.

Agents should inquire if they are aware of new financial instruments that might be more suited to their current situation.

Segmentation: To optimize marketing efforts, one can segment orphan policies based on the policy type and the age of the policyholder.

For example, targeting seniors with universal life policies can be lucrative for agents looking to offer life settlements.

Policy appraisal: Before diving into the specifics of a new policy or settlement, policyholders might want to understand the worth of their existing policy.

The Scope of the Opportunity

Estimates suggest that up to 40% of active insurance policies might be orphaned.

Even if we conservatively peg the figure at 10%, it translates to hundreds of millions of dollars in policies, all up for grabs.

By tapping into this segment, agents and advisors stand to benefit immensely from new business, settlements, and extra fees.

In conclusion, orphaned policies represent a vast, largely untouched reservoir of opportunity for proactive insurance agents and financial advisors.

By approaching this demographic with tact, understanding, and genuine intent to aid, agents can carve a profitable niche for themselves while providing valuable service to an underserved market.