The end of one year and the beginning of another is a time of reflection and change - a time when we consider what we’ve accomplished in the past year, and set goals for the one to come.
This is as true in a financial advisor’s office as it is anywhere else. After all, the most popular New Year’s resolutions of any given year always have to do with either losing weight or improving financial security. And while you probably can’t help your clients too much with that first goal, you have a lot to offer when it comes to the second one.
With this in mind, the New Year is a great time to start discussing options that you may have overlooked, or that may not have been applicable until recently. One of those is a life settlement.
What is a life settlement?
A life settlement is a transaction in which a life insurance policy owner sells his or her policy on the secondary market to investors for an amount greater than the cash surrender value.
A life settlement is often a positive alternative to lapsing a policy or surrendering it, as it can typically provide the policy owner with a much greater value for the policy than they would get otherwise.
Policy owners can secure the highest offer possible by working with their financial advisor and a life settlement broker. The broker has a fiduciary duty to the policy owner. Advisors and policy owners should not be fooled by television commercials and go directly to life settlement providers. They are representatives of the institutional investors that purchase life insurance policies and are fiduciary to the investors, it’s not in their best interest to offer your client the best possible price for the policy. That’s why working with a life settlement broker, who represents only you and your client, is advisable.
Why consider a life settlement?
If your client is retired or nearing retirement, and has a life insurance policy he or she doesn’t need, can’t afford, or no longer wants, a life settlement can be a great way to liquidate that overlooked asset.
For example, let’s say your client was one of the thousands of people who recently had their life insurance premiums jump significantly. Affording those premiums has become too burdensome, and he or she wants to surrender the policy.
Assuming your client meets the age and health criteria for a life settlement, he or she could stand to gain as much as 800 percent more than the cash surrender value by selling it on the secondary market.
This is because life settlement brokers, like Ashar, create a bidding war for your client’s policy, ensuring that they receive the best possible price. This money is delivered to your client as a lump sum with no strings attached.
How a life settlement can help your client in 2017
Seniors have suffered from an uncertain financial environment for nearly a decade, with the Great Recession impacting many people’s retirement outlook for the worse.
Many seniors are approaching retirement age with less saved than they thought they would have. In these cases, if a life insurance policy has become unnecessary it can become an important source of one-time income for retirees who need to pad their retirement accounts.
Another frequent reason life settlements are sought is to pay for the costs of long-term care. Nursing home care, home health nurses, and assisted living facilities are very expensive, and the costs are only going up. Proceeds from a life settlement can be of great help in offsetting these costs, and preventing seniors from having to rely too much on their adult children or other family members for financial help.
If a senior is living with a family caregiver, life settlement proceeds can also be used to help pay for household costs.
Of course, any money received from a life settlement belongs to your client, so it can be used for any purpose they deem fit.
This new year, consider how a life settlement could put your client in a better financial position. To learn more about whether your client’s policy might qualify, read our post “How to Tell if a Client’s Policy is a Good Prospect for a Life Settlement.”