Until recently, many life insurance policyholders were completely unaware of the secondary market where life policies can be bought and sold—a transaction known as a life settlement. Others may have heard of life settlements, but only in a negative context. Years ago, life settlements were commonly considered risky for seniors vulnerable to financial predators. However, laws have since been enacted to augment security measures and reduce risk for policyholders seeking to settle, which has helped solidify the industry as a stable and reliable one.
A major perk of pursuing a life settlement is that the transaction benefits both the insured policyholder and their financial advisor. For example, if you’re an advisor providing services to seniors, some of your older clients may struggle with their personal finances as they enter their retirement years and no longer receive a steady paycheck. While programs like social security and Medicare can help, they often don’t go far enough, leading seniors to seek alternative ways to pay their bills.
Life settlements offer a way out of this predicament for seniors over the age of 65 who own a term, whole or universal life insurance policy with a face value of at least $100,000. For advisors who are committed to fulfilling their fiduciary obligation to these clients, a life settlement can be a great way to dispose of an asset they no longer need.
As a result, advisors are able to provide value to their clients while also making valuable gains to their reputation, their portfolios and their bottom line. By turning non-liquid assets into much-needed cash, advisors can continue to build trust and confidence with their senior clients.
Policyholders are also winners in the life settlement game, and often take home a substantially larger sum than they would have if they’d surrendered their policies back to the insurance carrier or let them lapse. During a surrender, the insurance company foregoes paying the death benefit—plus they get to recoup the money the policyholder paid in premiums over the years. In short, most seniors walk away with a mere fraction of what they could get on the secondary market.
It’s important to note that life settlements aren’t for everyone, nor are they a solution for seniors facing significant debt. Rather, they’re a great option for policyholders who have no use for their policy and are already considering getting rid of it. For example, if you’re an older adult, and your beneficiaries are financially independent, you may benefit from a life settlement. If your premiums have increased and you just can’t justify the payments any longer, a life settlement could provide some relief.
Discuss your options with your financial advisor, attorney or accountant to get a more detailed picture of your financial situation before making any decisions. Once you’ve carefully considered your options, kick off the application process by obtaining a free quote. A life settlement could be just what you need to get back on your feet.