Life insurance carriers are raising premiums on universal life products – many by substantial amounts. For a lot of policy owners, these cost of insurance (COI) increases come as a major (and unpleasant) surprise. While certain carriers have been raising rates at a relatively modest rate, others have ratcheted up their premiums by a drastic amount causing the policy to eat through any built-up cash value.

For policy owners of large policies, this can translate to a six-figure increase – a substantial amount for even wealthy families. In cases like this, it might be questionable whether keeping the policy is the best financial choice. Here are a few steps financial advisors can take to ensure their clients’ life insurance assets are being protected or utilized in the most effective manner.

  1. Complete a full review of your client's life insurance policies

Use our free Life Settlement Checklist to determine the need and effectiveness of your client’s life insurance assets. Most clients who experience these major changes once believed their premiums would not change, so preventing potential surprises is paramount. As a part of the annual review, a policy valuation should be completed to determine the fair market value of the asset before recommendations and decisions are made. After all, how do you make decisions about any asset without first knowing its value?

“Without a life insurance policy valuation by a qualified appraiser in the secondary market, the client may be making a rash decision to terminate valuable coverage,” – Trusts & Estates Attorney in Florida

  1. Confirm the policy’s terms regarding cost of insurance increases and maturity date

During the review, pay attention to any policy wording that states the coverage ends or “matures” at age 100. Most policies that mature at age 100 were issued decades ago when life expectancies were lower. Because increased longevity is a major factor in planning today, it’s important to look closely at all the policy details.

Once you’ve completed the Life Settlement Checklist, be sure to confirm details of the policy with the carrier or your client’s life insurance writing agent. These details can be vital to the decision of whether to keep or sell the policy.

  1. Determine whether to keep the policy or sell through a life settlement

Many senior policy owners whose life has changed since purchasing their policy(ies) may find they no longer need the coverage in the same way they did when they bought them.

For example, if a senior’s children are grown and self-sufficient, they may not need the safety net a life insurance policy provides. If the senior policy owner is divorced or widowed, he or she won’t need to provide for a spouse. If a senior needs long-term care or is terminally ill, he or she may be able to get more value from the policy by selling it than by keeping it.

“A lot of my clients have varied needs or can’t afford to keep the policy they have. The question is, ‘How do we help the family?’ In these situations, life settlements become a critical solution.” – Insurance Advisor in Florida.

What you don’t want is your client deciding to walk away from a policy they’ve paid into for many years because they don’t believe they have any other option. Yet - as written about in major news outlets like the Wall Street Journal and the New York Times - this is exactly what has been happening to seniors all over the country. When financial advisors aren’t aware of the possibilities that the life settlement market offers, their clients can end up losing out on hundreds of thousands, even millions, of dollars.

Ashar Group is a licensed life settlement broker that acts as a fiduciary to protect the best interests of policy owners in the life settlement process by creating a competitive auction to deliver the highest value to the seller. Ashar Group is an independent seller’s representative and does not sell life insurance, manage assets, or purchase policies. Contact us to start your consultation.