Are you wondering whether a life settlement is the right choice for your client? Selling a life insurance policy is a big decision that you should be sure is the right option before recommending it to your client. However, when a senior, and possibly their family, is struggling under the immense burden of financial stress, a life settlement can be exactly what they need to alleviate financial stress.
As a financial professional, you have the power to help them relieve that burden. It’s vital to know what options are available - and a life settlement could be one of them. Here are a few ways to determine whether a life settlement makes sense for your client.
Determine if the policy could qualify for a life settlement.
Not every life insurance policy will fit the purchase parameters of the institutional buyers in the market, Let’s review the general guidelines. While any policy type could qualify, the most attractive policies are any kind of Universal Lifeand Convertible Term with a face amount of at least $100,000. Additionally, the insured would generally be 70 years or older with a decline in health since the policy was issued. Younger insureds may qualify if they have significant health problems.
Once you understand the general guidelines, take our Policy Value Questionnaire to gain a better idea of whether the policy might fit the market. Of course, you can always contact us to discuss the individual situation and needs with one of our experts.
Assess the cost of maintaining the policy.
Are the premiums becoming prohibitively expensive? Many life insurance companies have raised the cost of insurance over the past several years, forcing retirees to stretch their already limited incomes to maintain the policy. If the premiums are becoming too difficult for your client to pay, they may already be considering lapsing or surrendering the policy.
A life settlement could be a way to help alleviate the financial strain of maintaining the policy and allocate those funds to other areas of planning. Additionally, monetizing the policy can create significant liquidity the policy owner can use for anything they wish.
Asses the policy owner's unique situation.
When looking at a life settlement as a possible exit strategy, it’s important to understand the policy owner’s specific situation. Does the need for the policy still exist? Does the policy serve as a strategic tool in an estate plan?
If your client has a need for the insurance policy, it may make more sense to keep it and continue to pay the premiums. However, if the policy no longer serves a purpose - a life settlement can be a highly effective way to liquidate an otherwise burdensome asset.
A life settlement can be an excellent solution for seniors in any number of life’s transitions. As a financial advisor, it is important to know how to obtain the best results for your clients. That’s where we can help. Contact us today.