How To Start the Conversation About Life Settlements With Your Client
For financial advisors, a trustworthy relationship with a client is everything, and no advisor wants to enter into a conversation unless he is sure he is offering something that will truly benefit the person on the other side of the table. Since life settlements (the sale of a life insurance policy for cash) are often a quite favorable option, advisors who are comfortable explaining them can help people who need a living benefit to add value to their golden years.
“Have Your Life Insurance Needs Changed?”
As an ideal entry point to this conversation, an advisor simply needs to ask a client, “Have your life insurance needs changed?” That inquiry can serve as a springboard to two important discussions: the potential reasons why a person might want to sell a life insurance policy and the benefits that could result from such a sale. First, some of the reasons why a life settlement might make sense include:
– Payment of the premiums has become prohibitive compared to the potential payoff of the policy.
– Their term policy is reaching its end and they don’t wish to renew and possibly pay higher premiums.
– They have gone through a divorce or experienced some other change in regard to their beneficiaries.
– New tax laws have altered the structure of their estate planning and the life insurance policy is no longer necessary.
When clients discover that their life insurance policy is no longer serving their needs, they are free to think about the return they could get on a life settlement. The retirement years are often characterized by rising and unexpected costs, and the money that can come from selling a life insurance policy can help pay for:
– The cost of long-term care, which is becoming increasingly expensive for seniors. According to the senior living placement service A Place For Mom, in-home care averages $4,250 a month and residential placement averages more than $6,000 a month.
– Turning assets into a legacy by setting up a fund for grandchildren’s college education or making a significant charitable gift to a cause or organization.
– Paying off debt to decrease stress during retirement years and possibly create opportunities for travel, hobbies or other new opportunities.
– Defraying the costs of expensive medical bills, prescription drugs or therapy that can allow for a longer and healthier life.
– Re-investing for an improved yield without paying annual premiums.
In many cases, a senior adult has been looking to his or her financial advisor for advice for decades, and the relationship provides a valuable opportunity for the presentation of the life settlement option. Because many life insurance policy holders have never been made aware of life settlement, they might be skeptical if they read about it but more interested if they learn about the possibility from a trusted financial advisor.
Every day, insurance policies lapse when the money could actually be working for a senior adult. For advisors tasked with presenting the best portfolio of opportunities to their clients, a thorough education about life settlements and their potential should be an essential part of that important relationship. If you need help evaluating your client’s policy for a life settlement, please reach out for a life insurance valuation and explore Magna’s life settlement calculator.