As their trusted 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
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:
The policy is no longer needed or
To pay for the rising cost of
The premiums become unaffordable;
There is a change of beneficiary
due to death or divorce;
To receive more money than the
cash surrender value of the policy;
There is a forced liquidation due
to financial hardship or bankruptcy;
There is a change in estate
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;
Eliminating premium payments on unwanted or unneeded policy;
ability to purchase a more appropriate policy;
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;
Conversions of term policies;
3) Fees for
placing new investments, annuities, and/or life insurance; using the money
from the life settlement.
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?
- Insures a person over age
sixty-five (65) or with a serious illness?
- Has a face value of at
- Is at least two (2) years
- 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
© 2003 Jolene D.
Fullerton. All Rights Reserved.