Life settlements can be powerful tools in the right circumstances. They can eliminate costly premiums, liquidate a previously inaccessible asset, help seniors cover long-term or medical care costs, and pad a retirement fund.
Yet despite these potential benefits, many financial advisors are still wary of life settlements. That’s due, in large part, to myths and misunderstandings that many advisors still hold.
When you combine this with the fact that the majority of seniors still don’t know about life settlements, you end up with a huge loss of potential income on the senior’s side, and a loss of potential planning options, commissions, and business growth on the advisor’s side.
Are you inadvertently holding your clients and yourself back due to any of these myths?
Myth #1: Life settlements are unregulated, and therefore unsafe for my client.
Back in the 1980s, when life settlements first came on to the life insurance scene, they were fairly unregulated. Unscrupulous brokers and investors were able to prey upon sick people who needed cash to cover their medical bills, and who would therefore sell the policies for less than fair market value.
Thankfully, these sorts of predatory practices are largely a thing of the past. That’s because the life settlement market is now regulated just like any financial market. Consequently, life settlements are just as safe as any other financial transaction.
In addition, life settlement brokers, like Ashar, have formed specifically to help financial advisors get the highest possible bid for a client’s life insurance policy. Life settlement brokers create a bidding war for each policy among investors, and therefore provide a crucial layer of protection for policy owners who no longer need their life insurance, and want to access that asset.
However, certain life settlement providers will still approach advisors and even consumers directly, offering a price that is likely much lower than a broker could get. Advisors should always engage a life settlement broker for a life settlement transaction, to ensure their client receives fair market value for their policy.
Myth #2: Life settlements are prohibitively complex, and I can’t offer them to my client because I don’t know everything about how they work.
While it’s true that life settlements are complex transactions, the good news is that you don’t have to understand everything about them in order to offer them to your clients.
That’s what a life settlement broker is for. We work all the time with financial advisors whose clients want to complete a life settlement.
Our job is to act as an intermediary between the advisor and the life settlement provider, ensuring that your client gets the best possible offer and that every “i” is dotted and every “t” is crossed.
Myth #3: Life settlements don’t provide value for my clients.
This just may be the most pernicious myth that is keeping financial advisors from exploring the life settlement option for their clients.
In reality, a life settlement can provide significant value for your clients. If your client no longer needs his or her life insurance policy, and the policy qualifies, he or she could stand to gain up to 8 times the policy’s cash surrender value. That’s in addition to the money saved on costly premium payments.
Since the payment for a life insurance policy in a life settlement comes as a lump sum, with no strings attached, your client can use the money for whatever need is most pressing - long-term care, medical costs, adding to a retirement fund, or anything else.
As a financial advisor, your clients’ best interests are paramount. Don’t overlook this important opportunity to help them liquidate an underutilized asset.