Life Settlements & Financial Planners

It is the fiduciary duty of financial planners to fully understand a client's financial situation and make recommendations that are most advantageous to their client's needs. Life insurance policies are assets and maximizing their value means life settlements have a legitimate place in financial planning discussions with clients.

How do life settlements fit into financial planning?

Financial planners and advisors have an excellent opportunity to serve their clients with life settlements. For their senior policyholders, a life settlement means they can obtain a more advantageous alternative to surrendering their life insurance policy or letting it lapse. Financial services professionals can fulfill their fiduciary responsibility to promote their client's best interests by advising them of all available options for their life insurance asset as part of a broader financial planning strategy. A financial professional should follow the steps below when exploring life settlements as an option for their clients.:

  • Determine the suitability for a life settlement by evaluating the client's overall financial needs and determine if their current insurance coverage compliments their financial goals.
  • Utilize the online life settlement appraisal tool to determine the likelihood your client is a suitable candidate for a successful life settlement transaction.
  • Pursue the highest market value for the seller by either referring the case to a qualified life settlement broker or autonomously engaging with multiple life settlement providers to generate a competitive market offer.

How do financial planners and advisors benefit from life settlements?

Many life insurance settlements are performed for the purpose of purchasing other insurance or financial products. The proceeds from a senior life settlement are unrestricted and can be used to fulfill a wide range of financial and estate planning objectives for your clients. Life settlements provide clients with the flexibility to bring liquidity to one asset and in turn use the funds to purchase other investments.

  • Additional commissions on newly purchased investments
  • Reduce lapse rates
  • Commission on term insurance policy conversions
  • Create new capital and added value for clients
  • Offer the best advice to your clients by giving them the full range of financial strategies

How do financial planning clients benefit from life settlements?

When life settlements are appropriate, they offer clients access to large sums of money, financial flexibility and the ability to adjust insurance coverage to best suit their needs. Life settlements can help clients:

  • Buy new life insurance policies that are better suited to the insured or provide more cost effective coverage
  • Eliminate expensive premiums
  • Invest money elsewhere
  • Eliminate or reduce debt
  • Address estate planning changes
  • Fund retirement
  • Enable gift giving to heirs or charities

Understanding the secondary market for life insurance.

The secondary market for life insurance is similar to other secondary markets such as bonds. The buyers of policies are predominantly comprised of large international banks, hedge funds and retail investment funds. In all cases the when the policy is sold the insured is relieved of any obligations to pay premiums or manage the policy. The only interaction after a life settlement transaction has been completed may be by the buyer to periodically check with the senior regarding their overall health and well being.

The secondary market provides a competitive, "free market" system to establish the value of a policy and means for a client to gain the most money possible for their asset. A life settlement transaction will always equate with your client getting more than the cash surrender value for their policy. This secondary market offers increased liquidity for clients' assets and establishes a channel for disposing of unwanted or unaffordable life insurance policies. Even Term Insurance policies can qualify for a Life Settlement.

Clients are no longer limited to minimal cash surrender values or letting a policy lapse. The secondary market is available to you and your clients to substantially increase the value of their assets and liquidity of their investments.