Let me count the ways!
by Lisa Rehburg
4th quarter is here (already)! For many financial and insurance professionals, this is a busy time with Medicare, group and individual open enrollments, as well as annual reviews. But, this also can be a great time to help your clients if they no longer want their life insurance policies, no longer need them, or can no longer afford them.
We are hearing from many financial and insurance advisors right now who are seeking solutions for their clients, contacting us with questions (and concerns) about life insurance settlements. They want to be sure their clients are served well, and that a life insurance settlement is the right solution for their client.
I thought a quick synopsis of common questions and answers about life insurance settlements may be helpful. Here is what we are asked most often:
- Why should I suggest a client consider selling their life insurance policy?
Clients are being significantly impacted financially, and they may have a policy they no longer want, need or can afford. Perhaps a client needs money, needs to cut expenses or has no more use for the policy.
A life insurance settlement can offer liquidity to clients. On average, a life insurance settlement generates 3 – 5 times cash surrender value for your client. Even term policies can be sold.
- What can be done with the cash generated in a life insurance settlement?
The cash can be used for anything – help shore up retirement savings, pay down debt, fund home care or assisted living, donate to charity, fund investments – anything.
- I don’t know much about life insurance settlements – are they legal?
Are they regulated? Many people have not heard of a life insurance settlement, yet they have been legal since 1911 through a Supreme Court decision (Grigsby v. Russell) which deemed a life insurance policy an asset that can be sold. Today, life insurance settlements are heavily regulated by Departments of Insurance across the country.
- How much is a policy worth?
Every client’s situation is unique. The main factors determining the value of a policy are the premium to be paid, the life expectancy of the client and the face value of the policy. Policies can be worth several thousand to tens of thousands to hundreds of thousands of dollars. We have recently sold clients’ policies for amounts ranging from $5,000 to $550,000. The clients were thrilled because they were going to drop these policies, and walk away with little or nothing.
- What types of policies can be sold?
Any type can be sold – including term policies. Face values of $100,000 or more are preferable.
- But, doesn’t my client have to be really sick to sell?
No. While it is true that the shorter the life expectancy of the client, the more money their policy is potentially worth, this does not mean that relatively healthy clients cannot sell their policies. Typically, clients should be 65 or over, but younger clients can sell too, depending upon their health.
- Does it cost my client money?
There is no up-front application fee to find out how much a policy could be worth. Yes, there are commissions that are paid, based upon the amount of money the client receives, which can also be an additional revenue opportunity for you.
- How does my client know if an offer for their policy is the best price?
A good life settlement broker presents a client’s policy to many buyers to obtain the maximum value for your client. Our responsibility, passion and fiduciary duty is to obtain the most money for your client’s policy.
- How do I bring up life insurance settlements with my client? “
Do you have a life insurance policy you no longer want, need or can afford?” This is a very simple question to ask, and can be asked any time, but especially if your client is looking for funds, during an annual review, if a lapse notice has been received, or when a term conversion option is close to expiring. We have also helped professionals raise awareness through writing blogs for their website, articles for their newsletter, conducting webinars and podcasts. Let us know how we can support you.
- The financial markets have taken a hit, how is the life insurance settlement market?
The life insurance settlement market is very active right now, and some buyers have been particularly generous in their offers for policies.
I hope this succinct Q & A has been helpful. The bottom line is, please do not let your clients (or potential clients) lapse or surrender their life insurance policies, without looking at a life insurance settlement. Please feel free to contact us any time with any questions, or to discuss a client’s policy.
LISA REHBURG is president of Rehburg Life Settlements, a life insurance settlements broker. Rehburg has been working with brokers in the health and life insurance industries for over 30 years.