As an insurance agent, understanding life settlements can significantly enhance your service offerings and client satisfaction. A life settlement involves selling an existing life insurance policy to a third party for a lump sum that is more than the policy’s cash surrender value but less than its death benefit. This transaction is especially beneficial for policyholders who no longer need their policy or can no longer afford the premiums.
When policyholders consider their life insurance options, they generally have three primary routes: allowing the policy to lapse, surrendering it for its cash value, or opting for a life settlement. Of these, life settlements often provide the highest cash returns. Despite this, many policyholders are unaware of life settlements and the potential financial benefits they hold. As an agent, you are often the first point of contact when clients begin exploring these options.
Overcoming Hesitations Around Life Settlements
Many insurance agents avoid discussing life settlements due to various concerns, such as lacking sufficient education, questioning the legality, or experiencing pushback from insurance carriers.
1. Education and Training:
The life settlement industry is relatively young, which means not all agents are confident in discussing it with clients. Luckily, there are numerous educational resources available. Agents can take advantage of state-accredited life settlement courses that offer continuing education (CE) credits. Websites like 360training.com and WebCE provide accessible and affordable courses tailored to different states.
2. Legal Concerns:
Some agents resist life settlements because of doubts regarding their legality. However, life settlements are entirely legal. The legality was established in 1911 through the U.S. Supreme Court ruling in Grigsby vs. Russell, asserting that life insurance is private property and can be sold. Today, life settlements are regulated in many U.S. states, ensuring standardized practices and protections for all parties involved.
3. Carrier Opposition:
Insurance companies have historically resisted life settlements because surrenders are more profitable for them. In a surrender, the carrier pays the accumulated cash value, which is lower than the death benefit. However, life settlements offer broader benefits that also support the insurance industry. By making life insurance more flexible and valuable, life settlements can enhance the appeal of life insurance policies.
The Benefits for Agents
For agents, life settlements offer both financial rewards and client loyalty benefits. By referring clients to a life settlement broker, you may earn a commission if the policy sells. Furthermore, since the purchasing company will continue to pay premiums, you receive ongoing commissions. Besides financial benefits, life settlements enable you to provide more comprehensive financial advice to your clients, helping them adjust to changing financial needs and making you a more valuable advisor.
Not discussing life settlements may lead clients to seek advice elsewhere, potentially causing you to lose them. Presenting life settlements can reinforce your status as a trusted advisor, possibly resulting in referrals.
Advantages for Clients
The key benefits of life settlements for clients are the cash proceeds and the elimination of ongoing premium payments. This cash influx can significantly improve a senior’s financial situation, allowing them to cover healthcare costs, pay down debt, or simply improve their living conditions. Life settlements can transform a latent asset into a substantial financial resource.
Potential Candidates for Life Settlements
Typically, policyholders over 65 with permanent life insurance policies qualify for life settlements. Some term life policies also qualify, particularly convertible or those held by terminally ill individuals. Policies with a face value of at least $50,000 are usually preferred, even if comprised of several smaller policies.
Taking the Next Step
The life settlement sector is evolving as awareness increases. Forward-thinking agents will see the value in understanding life settlements and incorporating them into their client consultations. By doing so, you empower your clients with valuable information and options, helping them achieve their financial objectives.
Our Role
We specialize in helping clients discover if a life settlement makes sense for their situation. We provide the tools and expertise needed to navigate this complex decision. We invite you to explore our resources and consider how we can help you extend this valuable service to your clients. Together, we can maximize the potential of life settlements, benefitting clients and enhancing the service you provide as an agent.
