As a financial advisor, it is your duty of responsibility to put your client’s best interest first. Not everyone has your client’s best interest in mind, for example, life insurance companies. It is up to you to read the fine print and tell them what their life insurance carrier won’t tell them. Your client has options!

Because life insurance carriers are focused on retaining profit, millions of dollars’ worth of life insurance policies are lapsed or surrendered every year. It is exceptionally undesirable for seniors because they get no return or far less than the investments worth. They are just paying the insurance companies and helping them thrive. 

How is this possible?

Your client’s policy is structured, from the start, for insurance companies to make a profit off of them. You need to figure out the fine print. Life insurance companies do not want insureds to actually need the death benefits on their policy because that means they have to payout. Therefore, essentially, they set their policyholders up for failure.

Policies have increasing premiums over time that often forces policyholders to lapse on their policy. They make it difficult for seniors to keep their policies, and if they do, they expire before they can use them as intended.

While life insurance policies can be useful, you have to read between the lines. Seniors are practically being scammed out of their money, but you can figure out how to adjust policies and make them work for each individual. You can even help them get cash out of their policy; you just need to know a few things first.

1. What kind of policy do they have?

Determine what kind of policy your client has. Is it a term, whole or universal policy? 

There are so many options for coverage, but each is designed for an individual based on their health and life span. Permanent life insurance policies are the most common and are considered long-term, such as whole and universal. You have much more options with these types of policies.

Term life insurance policies are the types of policies that you want to keep a close eye on. Term policies aim to expire before the client passes. Therefore, the premiums go to waste, and in many cases, the beneficiary does not get the death benefit.

You can help clients avoid this by converting their term policy to a permanent one before it expires. The process does not require a medical exam and can be fairly easy. Once the policy is permanent, it becomes more valuable and opens up opportunities for the client. 

2. How is their health?

Their health should directly correlate with the constituencies of their policy. You want to monitor any health changes that they experience. Deteriorating health means they could qualify for an accelerated death benefit. If they cannot afford their premiums because of their illness, they are eligible.

This option is especially helpful for terminally ill individuals because they can get any death benefit payouts before passing away. The cash can be used to pay medical expenses and more. The expiration dates and conditions on their policy can be hard to spot, but the sooner you know, the better. 

3. Do they want to keep coverage?

If your client is having a hard time paying their premiums but still needs coverage, they may have an especially hard time finding options with the carrier. More often than not, they need to eliminate the policy in order to adjust to their budget.

There are ways that they can decrease the premiums on their policy, such as using the face value of the policy or using the cash value to pay their premiums. Unfortunately, both of these options are temporary solutions and decrease the death benefit. 

When decreasing the policy payment is not an option, and they do not want to eliminate it, there is also the option to give the policy as a “gift”. A policyholder can give ownership of the policy to a third party, and the new owner assumes the premium payments.

This may change who the beneficiary is and how the death benefit is collected, but it is an opportunity to keep the policy within the family and make sure the death benefit is still accumulated and received. Families often assign their policy as a gift to their children or the beneficiary already on the policy. If you can no longer pay for the policy but a family member can, it is a good solution.

4. Do they want to get rid of it?

Suppose your client needs to get rid of the policy altogether. You want to help them avoid lapsing or surrendering the policy; most of the alternative options out there will not benefit the client, so what else can they do? They can sell their life insurance policy.

You can help your client through the life settlement process by working with a broker to get the policy appraised and sold on the secondary market. Cash for a life settlement can get your client 4x their cash surrender value or more. Sometimes even as much as 10x the value. 

A life settlement is a good option for clients who qualify, need liquidity, and want to eliminate their policy. Even clients who need coverage should look into a life settlement. It allows them to rid of the policy with high payments to exchange for a better policy that suits their needs and has lower payments. 

Options advisors are missing about their clients’ insurance policy that could excel their financial well-being.

Life insurance carriers will not suggest a life settlement to their insureds because it takes away from their profit. It is up to you to educate and inform your client when it comes to life insurance policy strain. As the advisor, you can also benefit by earning a commission and helping your client achieve their financial goals. You get a happy client!

There is always a way to help a client in need. Overlooking a life insurance policy would mean missing opportunities. Life insurance companies are not looking out for your clients; it is up to you to read between the lines and find solutions.

Now is a great time to ask your clients about their life insurance policy. Could they benefit from a life settlement? Policies are essential to pay extra attention to as the economy recovers from the negative impacts of COVID-19. It can offer solutions for people in retirement as their portfolios recover. 

Rob HaynieFebruary 10, 2021

Rob Haynie

Mr. Haynie has been a major influence on the evolution of the life settlement industry during his almost twenty-seven year career of proactive involvement. Not only has he been directly involved in negotiating and settling several thousand contracts, he also presently serves on the board of directors of the Life Insurance Settlement Association (LISA) and is a charter member of the Association’s PPC committee, which is charged with the regulatory and legislative activities of the industry. Additionally, he has served on both the Customer Advisory Board (CAB) of ITM/TwentyFirst Services and the Advisory Board of the Insurance Studies Institute (ISI). He was named one of the top 10 most influential people in the life settlement industry worldwide. Mr. Haynie, an Alumnus of Florida State University, currently holds a Life Agent License with Viatical Settlement Broker Appointment for LIS and has spoken at almost every life settlement industry meeting or conference, published articles on the subject and has given many educational webinars as well.

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