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Life Health > Life Insurance > Life Settlements

Will Your Clients' Life Insurance Expire Before They Do?

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What You Need to Know

  • Low rates can make policies lapse sooner than expected.
  • Many clients may give up and take the cash surrender value.
  • Some clients have other options.

Is it a regular part of your practice to review your clients’ life insurance policies or offer a review to potential clients?

Whether the review shows a need for more, less or the same amount of insurance, policy reviews represent an outstanding opportunity for you to get in front of your clients to perform a valuable service.

Perhaps the most important part of the review should be to see if the policies are performing as expected.

Why Policies Disappoint

With lower interest rates, it is quite likely that many are not working as originally illustrated and that more money will be required to keep the coverage in force.

Or, perhaps, the clients’ objectives or needs may have changed.

Or, if term insurance, the policy must be monitored to determine when the conversion period expires or when the premium guarantee period ends.

At the review, questions you should ask are:

• Have you had a change in your family situation such as marriage or divorce, the birth of a child or the death of a beneficiary?

• Have you expanded, bought, or sold a business?

• Have you retired or taken on a new job or business opportunity?

• Have your finances changed, or has the need for estate liquidity been reduced or increased?

An Example

Here’s an example of a real-life situation.

A recently widowed 76-year-old was approached by her insurance advisor for a policy review to evaluate the change in her life circumstances.

She owned a $500,000 universal life policy that she felt she could no longer afford on her own, and she no longer needed the coverage. The cash surrender value was about $20,000.

Fortunately, her advisor knew about life settlements, and, as a result, he was able to obtain an offer for her of $73,000.

The client was, of course, thrilled. She had never heard of a life settlement as an alternative to surrendering a policy.

What if the client had not been approached by her advisor?

Convertible Term

Term insurance presents its own unique set of variables that must be watched.

Term is typically purchased for a need that will terminate after an expected period of time.

This, of course, raises the question of whether that need has terminated or will continue on longer than anticipated.

If the term policy falls short, it may be time to obtain a new policy or to convert the policy to permanent coverage.

While there are clearly opportunities if more insurance is required, there is also an opportunity if insurance is to be lapsed or terminated: a life settlement.

If the policy to be terminated is term insurance, unknown to many advisers is that these policies may also be sold in a life settlement.

Term policies that are convertible to universal life can make excellent life settlement prospects.

Policies often don’t perform as projected and peoples’ situations change throughout their lives.

Being proactive by offering to do policy reviews is the best way to ensure that your clients’ insurance will be in force at the time when it is needed most, at their death.

If, upon review, it is determined that there is more insurance than is needed, wanted or affordable, you owe it to your senior clients to explore the option of a life settlement.

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.



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