1. Be the Hero to Your Clients
Many seniors don’t know they have options when it comes to their life insurance policies. They may feel that they are stuck paying expensive premiums for a policy they no longer need or that doesn’t fit their current life situation. This lack of awareness creates a unique opportunity for you, as their advisor, to be the one who introduces them to a solution that can significantly improve their financial circumstances: the life settlement.
A Hidden Option
The Life Insurance Settlement Association (LISA) has reported that over 90% of seniors who let their life insurance policies lapse say they would have considered a life settlement if they had known about this option. This is a staggering number and highlights a massive opportunity for advisors to step in and provide much-needed education to their clients. A life settlement allows a policyholder to sell their life insurance policy to a third party for a lump sum cash payment. This amount can be far higher than the policy’s cash surrender value, which is often minimal or disappointing.
Found Money
For many clients, a life settlement feels like “found” money. Imagine a senior who has been paying premiums for years, only to find out that they can receive a lump sum of cash by selling their policy. Not only does this help them to get out of paying those premiums, but it could provide them with the cash they need for other important life expenses. This is an invaluable service you can provide that would immediately increase your value as an advisor in their eyes.
Eliminating the Premium Burden
One of the most significant benefits of life settlements is that they can help your clients eliminate the burden of premium payments. As seniors age, they often find themselves on fixed incomes, and the ongoing premiums for a life insurance policy can be a heavy financial burden. By helping your clients sell their policies, you provide them with a way to free up resources for other essential needs – whether that’s covering healthcare expenses, enhancing their retirement savings, or addressing debt. Not only are you providing a solution, but you are also helping them regain peace of mind in their golden years.
2. Take Comfort Knowing You Are Doing Your Fiduciary Duty
As a financial advisor, your fiduciary responsibility is paramount. You have an ethical and legal obligation to act in the best interest of your clients. Offering life settlements as part of your financial planning toolkit is a powerful way to fulfill that responsibility.
Life Settlements Pay More Than Cash Surrender Value
According to a U.S. Government Accountability Office (GAO) survey, life settlements often pay out on average seven times higher than the cash surrender value of a policy. This stark difference can have a massive financial impact on your clients, especially those in need of cash flow or liquidity. Ignoring the option of a life settlement may cause you to miss out on a solution that could provide your clients with far more than they would ever receive from surrendering their policy to the insurance company.
Protecting Yourself from Exposure
The last thing you want as an advisor is to be exposed for not presenting all possible options to your clients, especially if one of those options could result in thousands – or even millions – of additional dollars for them. A client could claim that, had they known about life settlements, they could have avoided letting their policy lapse or surrendering it for a fraction of its value. By offering this solution, you reduce the risk of legal or reputational issues, as you can clearly demonstrate that you have done your duty to inform them of all possible alternatives.
Life Settlements Should Always Be on the Table
Life settlements should be a tool in your toolbox that is always on the table when working with senior clients who no longer need or want their life insurance policies. Whether your client has a term or whole life policy, or even if the policy has lapsed, life settlements are an important option to consider. By proactively exploring this avenue, you demonstrate that you are going above and beyond to meet your clients’ needs and financial goals.
3. Help Clients Reinvest the Funds from a Life Settlement
Once your clients sell their life insurance policies and receive a lump sum cash payment, the next step is to guide them on how best to reinvest that money. By showing your clients how to use the funds from a life settlement effectively, you’re continuing to provide valuable service and helping them make decisions that can positively impact their financial future.
Annuities
One of the best ways to reinvest the funds from a life settlement is by purchasing an annuity. Annuities can provide a steady income stream for your clients, particularly if they are concerned about outliving their savings. With annuities, your clients can convert their lump sum into regular, predictable payments that can help cover daily living expenses or medical costs. This solution is particularly beneficial for seniors who are focused on ensuring that their money lasts throughout retirement.
Stock Market/Equities
For clients who are more comfortable with risk and looking for the potential for higher returns, reinvesting life settlement funds in the stock market or equities can be an attractive option. Working with clients to develop a diversified portfolio that aligns with their risk tolerance and financial goals can provide growth potential and help build long-term wealth. Additionally, you may help them explore ETFs or mutual funds that focus on dividend-paying stocks, providing both growth and income.
Real Estate
Another popular investment option for clients receiving a life settlement payout is real estate. Depending on their financial situation and goals, clients may choose to invest in rental properties or purchase a new home. Real estate can be a tangible asset that appreciates over time, and it may provide a reliable stream of income if they rent out the property. You can help your clients explore their options by analyzing local real estate markets and identifying properties that make sense for their overall financial picture.
4. Help Clients Make Ends Meet
Seniors often face significant financial challenges in their later years. Whether it’s escalating medical expenses, the cost of long-term care, or the need to pay off an existing mortgage, having access to additional cash flow can make all the difference in their quality of life. By recommending a life settlement, you can help clients who may otherwise struggle to meet these obligations.
Pay Medical Expenses
Healthcare costs can quickly spiral out of control, especially for seniors who may be dealing with chronic conditions or needing long-term care. A life settlement can provide a lump sum of cash that can be used to cover medical expenses, such as hospital bills, doctor visits, prescription medications, or long-term care services. This option can help ensure that your clients have the financial means to maintain their health and receive the care they need.
Long-Term Care
With the increasing cost of long-term care, many seniors find themselves burdened with medical expenses they can no longer afford. A life settlement allows them to sell their life insurance policy to help pay for nursing home care, home health aides, or other necessary services that will improve their quality of life. Providing this option to your clients shows that you are concerned about their well-being and committed to helping them navigate the complexities of aging.
Pay Off Mortgage
For many seniors, the mortgage is one of the largest expenses in their monthly budget. The funds from a life settlement can be used to pay off or reduce their mortgage, providing them with greater financial freedom and peace of mind. Removing the burden of a mortgage payment can drastically improve a client’s financial situation and ensure they are not struggling to meet monthly obligations.
5. Build an Additional Income Stream for Your Business
In addition to providing immense value to your clients, offering life settlements can also help you build an additional income stream for your advisory business. By facilitating life settlement transactions, you can earn a commission based on the size of the policy and the payout to the client.
Creating a Revenue Stream
As an advisor, offering life settlements as part of your services can significantly enhance your bottom line. By partnering with life settlement providers, you can receive compensation for the policies you help clients sell. The more clients you serve and the more policies you help facilitate, the more potential revenue you can generate for your business.
Strengthening Client Relationships
Beyond the financial benefits, offering life settlements positions you as a trusted advisor who is dedicated to your clients’ financial well-being. Helping clients access more money through life settlements can deepen the trust they place in you, which may lead to long-term relationships and more referrals. The reputation you build through offering life settlements can create a steady stream of referrals, helping you expand your business and attract new clients.
Conclusion
Incorporating life settlements into your toolkit can provide substantial benefits for both you and your clients. Not only does it allow you to help clients access cash they may not have known was available, but it also positions you as a fiduciary who is dedicated to providing the best options for their financial situation. By offering life settlements, you can help clients reinvest funds for the future, pay down debt, and cover medical or long-term care expenses. Additionally, this solution provides an opportunity to build an additional income stream for your business.
Don’t miss out on the opportunity to enhance your clients’ financial lives while growing your advisory business. Life settlements are a valuable tool that can help you make a lasting, positive impact on your clients’ financial futures.