3 Reasons Agents Should Inform Clients About Life Settlements
What agents don’t know can hurt the financial future of life insurance policy owners. About half of all agents are uninformed about the benefits of life settlements, which is the sale of a life insurance policy for cash to an investor. Because of this disconnect seniors are missing valuable financial opportunities.
Take the case of a 71-year-old policy owner with a $1 million, 20-year term life insurance policy. His policy was about to expire, with a prohibitive rise in premiums from $5,000 to more than $220,000. He lapsed his policy because his agent didn’t inform him about life settlements, which could have converted his term policy to a permanent Universal Life product with a much lower annual premium of $28,000 and also paid him $200,000 for his policy.
According to the ICR Life Insurance Study, 79 percent of clients feel agents should inform them about life settlements. More than half a million U.S. seniors lapse their policies annually, and only 1,250 take advantage of a life settlement, meaning that only one in 400 people benefit from life settlements. The key to increasing that percentage is making sure seniors are well informed about their options. Life settlements are living benefits, or assets that help seniors while they are still alive. Yet despite their potential benefits, they are often overlooked by agents and, by extension, their clients.
There are three reasons agents should inform policy owners about life settlements:
1. Living Benefits Can Be an Effective Selling Tool
Insurance agents often hear the question, “What happens if I don’t need life insurance in the future?” Changes are inevitable over the years, sometimes altering a person’s reasons for purchasing life insurance in the first place. When clients buy life insurance, they should know that their investment has potential future resale. A living benefit today often outweighs the need to collect a death benefit tomorrow. A life settlement can put money back into the pockets of seniors who qualify.
2. Regulations Are Beginning to Require Disclosure
In an effort to protect seniors, more states are implementing consumer disclosure requirements when a senior wants to make a policy change. States are beginning to require insurance carriers inform policy owners that they should consult with a licensed insurance or financial advisor to learn about alternatives to lapsing a life insurance policy–options like selling the policy for a life settlement, gifting the policy to someone else as a charitable contribution, or converting it to a long-term care policy. These disclosure acts are in place in eight states and pending in two.
3. Living Benefits are a Win-Win-Win
Spreading the knowledge of life insurance options benefits agents, investors and, most importantly, policy owners. Agents may be eligible to receive compensation from life settlement providers. Investors benefit from purchasing the policy and collecting the face value when the policy matures. And policy owners win by getting rid of annual premiums and receiving the highest possible payout for their life insurance policy.
If you need help determining if a client qualifies for a life settlement, explore our life settlement calculator or simply reach out for a personalized life insurance valuation. Magna Life Settlements can help you determine if a client’s life insurance policy qualifies for a life settlement.