dallarsWhen you’re reviewing your client’s assets, what do you take into account? Their house, certainly. Investment and bank accounts. Valuables, like art or jewelry.

But are you including their life insurance policy? You should be.

Although many people, both consumers and those in the financial world, aren’t aware of this fact, a life insurance policy is an asset just like a house or a savings account. As an asset, it can be bought and sold as a life settlement - which can, in certain cases, offer a huge benefit to your senior clients.

Because of this, it’s important that as they get older, you review your clients’ life insurance policies on a regular basis. The circumstances that occasioned the original purchase of the policy may have changed dramatically in the years since, and the policy may no longer be serving much of a purpose. In these cases, your clients may have options other than surrendering or lapsing the policy.

Deciding whether that life insurance policy is still necessary

If you have older clients, you’ve probably talked with them about their life insurance at some point. If he or she is one of the many people affected by the recent rise in premiums, you may have discussed ways to manage those higher payments.

One thing you might not have discussed, however, is whether or not that policy is still a good investment for your client. There are all kinds of reasons a policy might no longer be necessary, including:

If any of these situations apply to your client, you may want to ask them about their policy and whether they want to keep it, or explore other options.

Why choose the life settlement option?

If your client’s policy premiums are very high or are becoming a burden, or if they need to access extra cash, they may already be considering lapsing or surrendering the policy.

While this can make sense in certain situations, your client should also know about the life settlement option.

In this transaction, an institutional investor buys the policy on the secondary market for a greater - sometimes as much as 800 percent greater – value over the cash surrender value. The investor assumes responsibility for the premiums and becomes the new beneficiary, while your client collects a lump sum payment.

This payment can then be used for anything - medical bills, padding a retirement fund, or a trip around the world. The money belongs to your client, and can be used for any variety of things.

Why you need to talk to your clients about life settlements

Life settlements are a viable way to help seniors live more comfortably in their golden years, yet many financial advisors don’t know much about them. Because of that, they don’t discuss the option with their clients.

What this results in is thousands of policyholders leaving millions of dollars on the table. In fact, in 2014 (the latest year for which data is available) U.S. policyholders forfeited more than $100 billion in life insurance value. A lot of that value could have been liquidated into cash payments through life settlements.

Life settlements can be a helpful way for your clients to monetize an often-overlooked asset into cash, without having to surrender it for a fraction of the policy’s value. If you’d like to talk more about giving your clients this option, contact us at Ashar today.