BY LISA REHBURG
I don’t know a lot about life insurance.” “I don’t sell life insurance.” “I am not a life insurance expert.” These are all phrases I have heard when I speak with agents about life insurance settlements (or life settlements, for short). The good news is you don’t need to know a lot about life insurance or even sell life insurance to help your clients. But, why would you want to bring up life settlements in the first place? The short answer is three-fold:
1) because life settlements can be beneficial for your clients any of your clients
2) they can be good for your business as a revenue opportunity
3) there are investor groups who are spending heavily on advertising to obtain policies directly from your clients.
Every year, 500,000 seniors will lapse their life insurance policies, walking away with nothing. These could be your clients or potential clients. You do not need to be the writing agent on your client’s life insurance policy in order to help them! First, let’s talk about the different types of clients you may have:
Medicare clients: If you focus on Medicare, or have Medicare clients, these are perfect opportunities — you are speaking with the right demographic. Typically, life settlements work best for seniors. Why? The investor groups who purchase life insurance policies are looking for clients with 10-15 years of life expectancy, or less. Seniors are the perfect demographic for Medicare and for life settlements. Many times, we find that the reason a client purchased the policy 15, 20, 25 or longer years ago is no longer a concern. The house is paid off, the kids are gone, income replacement is no longer an issue after retirement, policy premiums are too expensive, a spouse has passed away are all common reasons why seniors no longer want their policies.
Small Group clients: If you focus on writing small group plans, life settlements may still apply. How? If you have a business owner who is retiring or selling the business, they may no longer need the “key person” insurance. What about policies that are part of a buy/sell agreement that are no longer needed? Another opportunity. Your group client may have retirees on staff that may no longer need their policies. Letting your group clients know about life settlements can be another way to serve them.
Individual health insurance clients: As mentioned above, typically seniors are the appropriate demographic for life settlements. But, life settlements are not just available for seniors. The older a client is, the healthier they can be to qualify for a life settlement because they naturally fit into the 10-15 year life expectancy window. Life settlements can be of benefit for younger clients (we routinely work with clients in their 50’s), but they have more significant health impairments to fit into the life expectancy window. The bottom line is that your younger individual health insurance clients may still be able to benefit from a life settlement, so don’t rule out talking with them. And, even if they may not qualify because they are healthy, they may have parents, grandparents or other family members who may benefit and you can help them.
Long Term Care insurance clients: Have you ever had a client be declined for long term care insurance? Perhaps, they already have significant health issues, and cannot qualify in underwriting. Instead of walking away from this client with no commission, offer a life settlement as an option, especially if they are looking for ways to fund long term care needs. They benefit and you benefit from receiving a commission for the settlement.
Property & Casualty clients: If you write auto, homeowners, Workers Comp, etc., these clients are seniors, business owners, and children who need help with their parents or family members, just as written about above.
Life insurance clients: Look for clients who are coming to the end of the conversion deadlines on their policies. Most clients will most likely walk away from their policies because they do not want to pay the higher conversion premiums. Selling the policy gets them something for their years of payments, versus nothing when they walk away from it. If they do wish to convert part of the policy, look at selling the balance of the policy. Clients who have universal life policies that are becoming too expensive or are “blowing up” are prime candidates for life settlements. On average, life settlements generate 3-5 times cash surrender value for clients, so any time a client is looking to surrender their policy, consider a life settlement.
SECOND, LIFE SETTLEMENTS CAN BE GOOD FOR YOUR BUSINESS.
So, how do you talk to clients about life settlements? Think about a client’s life insurance policy as another asset, like their car or house, because it is. And as with any asset, it can be sold. If you do annual reviews with your clients, asking about their life insurance policy is a natural question. Other appropriate times to bring up life settlements with clients include when you know their life circumstances have changed, such as:
• losing a spouse (they may not need their life insurance policy any longer)
• when a client retires (the policy premium may not fit into their retirement budget)
• when they are thinking of canceling or surrendering their life insurance policy
• when they needed funds to pay for assisted living, memory care or home care for themselves, their spouse or their family member.
These can be common conversations that you may be having with clients.
In addition, proactively raising visibility in your book of business can bring rewards. Informational emails, an article in your monthly newsletter, speaking at your networking group or Chamber of Commerce are all good ways to let clients and potential clients know that you have a solution for their unwanted, unneeded or unaffordable life insurance policies. One Medicare agent I know sent a brief postcard to his clients, which resulted in a dozen inquiries, and several sales.
Lastly, there are investor groups who are advertising directly to your clients. Why let them? When your client contacts one of these entities, not only are they going around you, but they are trying to obtain the policy as inexpensively as possible. When you go to buy a car, are you trying to pay the most money for that car that you can? Of course not. It is the same thing when your client contacts an investor group directly. And, clients do not know how much their policy is worth, so they under-sell them. By working with you, and a good life settlements broker, you maximize the amount of money your client receives for their policy. In a way, you are fulfilling your fiduciary duty to your client.
The beautiful thing about life settlements is that they are win-win for your client, and for you. Your client receives money from selling an asset they didn’t know they had an asset that they were going to walk away from with little or nothing. You win because there is a commission opportunity for you for the settlement itself, but also in the opportunity for additional product sales such as annuities, now that your client has a lump sum of cash in their hands from the sale.
Life settlements are not right for all clients, nor should they be. But, when the fit is right, settlements are one more way you can serve your clients any type of client. If you aren’t talking about life settlements to your clients or potential clients, someone else may be.
LISA REHBURG is president of Rehburg Life Settlements, a life insurance settlements broker. Rehburg is energized by helping brokers and their clients benefit from unwanted or unneeded life insurance policies. By having access to many investor groups, Rehburg Life Insurance Settlements can place more policies and realize a better return for clients. Rehburg has been working with brokers in the health and life insurance industries for over 30 years.