happy senior couple sitting on the beachOne issue that financial advisors, elder care lawyers, long-term care advisors, and insurance advisors may all experience in common is that they don’t know when a life settlement might be a good fit for a client.

Since many financial professionals are unfamiliar with the life settlement market already, it can be difficult to determine how it might work given a specific client’s situation. Will it have any retirement implications? Will it change their estate plans? Will it affect their adult children?

The answers to these questions will vary, of course, depending on the client, but you don’t actually have to have these answers in order to explore the life settlement option. There are several simple guidelines you can follow to determine whether it might be worthwhile to recommend one.

Your client does not need his or her life insurance.

If your client needs his or her life insurance policy for any reason, then a life settlement is not the right choice.

Reasons for needing the policy could include tax, estate, or retirement planning. The client could have a spouse or special needs child who is dependent on their income.

A life settlement is for individuals who are carrying a life insurance policy that is no longer necessary - it may be too costly, for example, or the people whom it was intended to protect are fully independent.

Your client needs long-term care, or will likely need it in the near future.

One of the most common reasons that people obtain life settlements is to help them pay for long-term care. Long-term care costs are high already and rising, and what’s more, many families don’t plan for these expenses in a serious way. Medicare and long-term care insurance can help, but they are rarely enough to cover everything a person may need.

A life settlement provides your client with immediate liquidity that they can put toward paying for long-term care. Some clients place the money they receive from the life settlement in a special account that makes payments directly to their long-term care facility.

One of the most positive outcomes of using a life settlement to pay for long-term care is that it can remove the intense financial pressure that weighs on so many families. Often, a client is not alone in paying for their care - adult children are contributing as well.

Life settlements can allow the family to refocus their energies on what really matters: enjoying each other and whatever time they have together.

Your client may outlive their retirement fund.

Outliving one’s retirement savings has ranked as one of the most pressing worries for retired people in a number of surveys over the past several years.

This is because, due to a number of factors like the recession of 2008 and increased longevity, retired people today are less financially secure than their parents. Many may continue working longer, take part-time work, or look to decrease expenses in order to avoid running through their funds early.

However, some people may need or want to take the additional step of selling their life insurance policy to pad their retirement fund further. In these cases, a life settlement can give them a way to add greatly to both their retirement funds and their peace of mind.

Life settlements can offer huge benefits to clients in certain situations. To learn more about working with your clients on a life settlement, read our post “3 Urgent Reasons You Should Talk to Your Retired Clients About Life Settlements.”