This post is part of our series for advisors to pass to their clients. Knowing more about your clients’ needs will help you to better serve them. Aging doesn’t have to be scary, and we here at Ashar want to help you provide the resources that policy sellers need to flourish in this chapter of their life.
At Ashar, we may be in the life settlement business, but that doesn’t mean that we think everyone should sell their life insurance. In fact, that’s about as far from the truth as you can get.
Life settlements can be wonderful financial solutions for many people, but only under a set of very specific circumstances. For people looking for financial relief from unaffordable premiums, or those who no longer need their policies because of changes in estate tax law or the death of a spouse, a life settlement can be a great way to generate a new stream of income. The same is true for individuals facing the costs of long term care, or expensive medical procedures for an illness.
If you fit into one of these categories, maybe it’s time to ask your financial advisor to contact us at Ashar, to start discussion your options. But if you don’t, then chances are you should keep your life insurance, if it’s at all possible.
Here are a few of the reasons NOT to consider a life settlement.
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- You can easily afford your insurance premiums. If paying the monthly or yearly premium on your policy is not causing you financial hardship, then it’s a good idea to hang on to it. There are a couple of reasons for this. For one thing, depending on your age, there’s always the chance that you could need the extra income a life settlement can provide in the future. Maybe your retirement fund doesn’t last as long as you thought it would, or you’re confronted with the need to pay for long term care for yourself or your spouse. If that happens, selling your life insurance policy on the Secondary Market could possibly help relieve a lot of the financial burden.
Another possibility is the same reason you bought your life insurance in the first place: to help protect your family if you die suddenly. Whether or not you think the money from the death benefit would be necessary to maintaining your family’s well-being right now, there’s no way to know what the future may hold. So if you can easily ensure that it will be there for them, why not do so?
- You still want life insurance, just not the policy you have. If you’re considering a life settlement because you’d like to put the proceeds toward a new policy, it’s important to do your research first. Can you get a similar, or better policy at your current age at a rate you can afford? Another factor that will impact your policy options are any changes in health status since you first purchased your original policy. If you’re looking to reduce your premiums while still retaining your coverage, you do have options—just ask your financial advisor.
- You still want life insurance, but you also need to improve cash flow. If you still need your life insurance, but have a temporary need for cash, there are other options besides a life settlement. Many policies allow you to borrow against your policy. If you have a terminal or long-term illness, see whether you’re eligible for accelerated death benefits, which would allow you to access your death benefit while still living to help pay for care. Not all policies offer this, but some do, so be sure to check with your financial advisor or insurance agent on the details of your policy.
- You can’t determine the fair market value for your policy.Without knowing the fair market value of your policy, you have no way of knowing whether you’re getting a fair price. That’s why Ashar Group developed the Secondary Market Valuation, or SMV®—it’s a policy analysis that determines the fair market value of your policy through a five-step process. If you are considering a life settlement, make sure to ask your financial advisor to get in touch with Ashar. We love helping our clients save time and reduce uncertainty with the SMV® and our quick policy quiz, which lets you see if your policy is likely to qualify for a life settlement solution.
While life settlements can be an excellent option for many people in certain situations, they’re not for everyone. Before you begin looking into a life settlement, make sure you take a realistic look at what your goals are, and what options can help you reach them. And if you do decide to pursue a life settlement, we’d love to help. Ask your financial advisor to contact us via email or give us a call at 800-384-8080 today!