Is a Life Insurance Settlement Right for Your Client?

Operating in the best interest of your client will always be advantageous.

These individuals are looking for monetary advice that will benefit them in their golden years of retirement.

Deciding if a life settlement is the right choice for your client, however, is not an easy task. In order to find out, your job as an industry professional is to guide clients in the right direction by advising them on the advantages and disadvantages of making such a big decision.

Help clients learn about these potentially unforeseen retirement costs, which can cause both major and minor financial fallout.

There are numerous benefits to deciding whether a life settlement is right for your client, but many advisors fail to recognize this as even an option. Opting for a life settlement is advantageous for your client when they no longer need or want their life insurance policies. When they do not want their policy to lapse either, a settlement can be a good option.

After so many years of paying into a policy, a large value has probably accrued. To let it lapse or become terminated is a seriously uneconomical decision, especially when there are more lucrative options on the table.

The hidden value in unwanted life insurance policies

Settling a life insurance protocol isn’t only advantageous for your client, it boasts benefits for financial professionals as well. When liquidity becomes available to your client once they receive their lump sum, new options open up that could help in supplementing retirement pension, pay for medical bills, and assist in long-term living expenses.

As a financial advisor, you may advise your client to re-diversify this lump sum into another asset or holding. When financial professionals are knowledgeable in the field, they know that a life settlement transaction results in benefits for both parties: the client as well as themselves.

Clients have the right to know the ins and outs of the settlement process, so it is always important to be upfront and honest with them.

A life settlement is a practical option for clients who:

* Help clients learn about these potentially unforeseen retirement costs, which can cause both major and minor financial fallout.

* Are terminally ill as they receive an accelerated death benefit.

* The policyholder wants to transfer the ownership as a gift.

* If they desire a life settlement.

* In case of policy reconstruction: the sale of a life insurance policy in exchange for monthly payments made to a long-term care services provider.

A great beginning point for your elderly clients is to simply inform them of the life settlement option. Letting them know that this course of action is a great alternative to letting the policy lapse or to surrender it, will give them insight and really give them something to consider. By giving them options, professional advisors aren’t leaning in one direction or another, but instead are simply advising the client of the choices available. When your client realizes that they can obtain an almost instant lump sum for their policy, they will inevitably consider it as a lucrative option for themselves.

A few cons against life insurance settlements should also be considered. Once your client cashes in his or her policy there will be added taxes upon this moneys, in some states as high as 15 percent. In addition, one also needs to be vigilant of fraudulent brokers or brokers who say they are able to secure a certain percentage of the policy’s value back, but do not yet know what the final rate will be from the hedge funds.

Hedge funds lump life settlements into larger portfolios. So engage in this fiscal transaction with caution, making sure the paperwork is up to code as you and your client go through the process.

Although a life settlement isn’t always a viable option for all of your clients, it’s an alternative that should be looked into. Not all who apply will qualify for a life settlement, which is why there are benchmarks that need to be met before a candidate can be approved. The most ideal candidate will be a retiree who is 65 years old or older who currently possesses a life insurance policy and is looking for a way to get money for it without letting their insurance lapse.


Rob Haynie serves as Managing Director of Life Insurance Settlements, Inc. He is a noted speaker, panelist and author or contributor on the topic of life settlements in various trade journals, periodicals and press outlets across the globe. Mr. Haynie graduated from Florida State University in 1988 located in Tallahassee, Florida. He currently resides in Fort Lauderdale, Florida with his wife of 19 years, Lauren and their identical twin daughters, Skyler and Brooke.