As their trusted financial advisor, your clients rely on you for innovative insurance and financial planning options. Due to recently enacted laws financial professionals have the opportunity to add a new product to their client services – Life Settlements. A Life Settlement is a powerful new tool that allows you to help your clients maximize the full potential of their life insurance policies.
What is a Life Settlement? A Life Settlement is the sale of an existing life insurance policy for a lump sum of cash that is less than the policy’s face amount but more than the cash surrender value. A life insurance policy is property, like a car, house, stocks and bonds can be legally sold in accordance with applicable laws. Through a Life Settlement, a policy owner can realize value today from an asset that is generally thought to only have a benefit when the insured passes away.
Some of your clients may be thinking about surrendering their life insurance policies or simply letting them lapse. There are many reasons why a senior citizen would want to sell their life insurance policy:
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The policy is no longer needed or wanted;
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To pay for the rising cost of long-term healthcare;
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The premiums become unaffordable;
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There is a change of beneficiary due to death or divorce;
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To receive more money than the cash surrender value of the policy;
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There is a forced liquidation due to financial hardship or bankruptcy;
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There is a change in estate planning needs;
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The desire to live their later years more comfortably.
If you begin to see signals of missed premium payments or know that your senior client is experiencing life-changing events, a Life Settlement may be a great option for them to consider. Now these unfortunate events can be turned into win-win situations for both you and your client.
Your client benefits by:
1)
A lump sum of cash to spend or invest as they like;
2)
Eliminating premium payments on unwanted or unneeded policy;
3)
The ability to purchase a more appropriate policy;
4)
Receiving a tax deduction if the client donates some or all of the policy to charity.
You benefit by:
1)
Fees for facilitating the life settlement transaction;
2)
Conversions of term policies;
3)
Fees for placing new investments, annuities, and/or life insurance; using the money from the life settlement.
4)
Knowing that you provided your client with a beneficial option to lapsing or surrendering their policy.
How does a Life Settlement work? First, the life insurance policy should be appraised. Do any of your clients own a life insurance policy that meets the following criteria?
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Insures a person over age sixty-five (65) or with a serious illness?
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Has a face value of at least $100,000?
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Is at least two (2) years old?
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Insurance coverage is no longer needed or wanted?
A Life Settlement Broker can determine the policy’s eligibility for a Life Settlement and will seek to obtain the highest possible offer for the policy. The value of a life insurance policy is determined by a number of factors, including, but not limited to, the age and medical condition of the insured, type of insurance policy, rating of the issuing insurance company and amount of premium payments to keep the policy in force. Most types of insurance policies can qualify, including universal, whole life, and converted term.
When a mutually agreed upon price is determined for the life insurance policy, the owner is paid a lump sum in cash, the ownership and beneficiary rights are transferred to the purchaser, all future premium payments are the responsibility of the purchaser and upon the death of the insured, the death benefit is payable to the purchaser.
The author, Jolene D. Fullerton, practicing attorney for eighteen (18) years and former Director and Vice President of the Viatical and Life Settlement Association of America, the industry trade association, is General Counsel for a leading Life Settlement Broker company, First Secured Life, LLC. They are located at 1926 Victoria Avenue, Ft. Myers, FL 33901 Telephone: (877)968-7785 Website: http://www.firstsecuredlife.com
This article courtesy of http://www.protectionlifeinsurance.com.
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