Turning Mature Policies into Client Value: Life Settlement Strategies
Life settlements remain one of the most underutilized financial tools for seniors. Despite their potential to generate significant liquidity from existing life insurance policies, many clients are unaware this option exists. For insurance and financial advisors, understanding life settlements can create meaningful opportunities to serve clients while providing additional planning strategies.
What is a Life Settlement?
A life settlement allows a policyholder to sell their existing life insurance policy to a third party for more than its cash surrender value but less than its death benefit. The buyer continues paying premiums and collects the death benefit when the insured passes away.
Why Seniors Benefit
Many seniors find themselves with policies that no longer meet their current financial needs. A life settlement can provide:
Immediate cash for healthcare, long-term care, or other pressing expenses
Financial flexibility without taking on debt
An alternative to lapsing a policy and losing all accumulated value
Advisory Considerations
Advisors should be aware of the key factors when evaluating life settlements for clients:
Policy type and value: Universal life, whole life, and some term policies may qualify
Health and age of the insured: Older policyholders or those with certain health conditions typically see higher offers
Market conditions: Secondary market rates fluctuate, affecting potential payouts
Tax implications: Proceeds may be partially taxable; consultation with a tax professional is recommended
Opportunities for Advisors
Properly guiding a client through a life settlement can strengthen trust and deliver tangible financial benefits. Advisors who understand the nuances of this market gain a competitive edge in offering creative solutions for seniors.
Life settlements are a valuable yet often overlooked tool in retirement planning. By educating clients and assessing each policy carefully, advisors can unlock real value while providing tailored solutions that address both financial and personal goals.