About 64% of Americans worry more about running out of money in retirement than death — that's according to the 2025 Annual Retirement Study from the Allianz Center for the Future of Retirement.
Before the introduction of universal life, cash value whole life insurance represented an important piece of many people's retirement plans.
The Whole Life Nest Egg
Whole life insurance was and still is often marketed as a product that could provide protection from your untimely death for your beneficiaries, and then, later in life, the cash values could become a valuable addition to a retirement portfolio.
Whole life, especially with its annuitization features, could be ideally suited for the transition from death concerns to retirement concerns.
The Universal Life Change
Today, universal life and term represent a large percentage of life insurance sales.
While universal life can be used as an accumulation vehicle, it is not commonly funded that way.
Typically, universal life policies are purchased assuming minimal premiums, which sometimes include long-term no-lapse guarantees.
This minimal funding approach does a fine job of providing an economical death benefit but frequently accumulates little or no cash values for retirement.
Similarly, term insurance policies usually have no cash value.
So, they do not offer any contribution to retirement assets either.
A Solution
Both universal life policies and term policies convertible to universal life can be very attractive to life settlement investors, and therefore, their sale can add meaningful cash for retirement.
Traditional whole life policies with high cash values, unfortunately, are not usually attractive to life settlement investors as they raise the cost to purchase the policy.
But, as a proxy for a policy's cash value, the proceeds of a life settlement can serve as a missing link between universal life or term policies and retirement.
Have you had a client entering into or already in retirement lapse a policy?
Did you discuss the possibility of a life settlement before the lapse occurred, or did you first become aware only because you received a lapse notice from the insurance company?
If the latter, then it was too late to try to benefit your client, as once a policy lapses, reinstatement starts a new contestability period — something which disqualifies a policy from being eligible for a life settlement for an additional two years.
Making sure your clients, and especially those at or nearing retirement age, are aware of life settlements can prevent a significant lost opportunity to add to their retirement nest egg. The availability of a life settlement for any given policy is uncertain, but as we say, "It can't hurt to try — it can only hurt not to."
Robin 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.
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.
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