Three Reasons for a Life Settlement
Are your high-net-worth clients struggling with rising life insurance premiums? Or perhaps they're sitting on policies with untapped value? Life settlements can be an extremely beneficial solution.
Valuable Strategy: Life Settlements
As professional advisors working with high-net-worth individuals (HNWI), you are constantly seeking innovative strategies to protect and maximize assets. Life Settlements offer a unique opportunity and act in the best interests of your clients.
What are Life Settlements?
Life settlements are not new, but their upside is often overlooked. They allow seniors or policyholders with significant changes in health to sell their life insurance policies on the open market for much-needed cash. The sale proceeds are less than the death benefit but often significantly more than the surrender value, with the added advantage of eliminating future premium payments.
Reasons to Sell a Life Insurance Policy
Traditionally, people sell their life insurance policies for a few key reasons:
1. Reduced Need for Coverage: Circumstances change (divorce, death of a spouse), or the policy's original reason no longer applies.
2. Financial Constraints: Rising premiums are burdensome, especially for those on fixed incomes.
3. Desire for Liquidity: Policyholders want cash to achieve other financial goals.
New Opportunities for High-Net-Worth Individuals
In recent years, life settlements have become even more relevant for HNWI,
particularly in these scenarios:
Converting Term to Permanent Insurance: Term policies with conversion riders can be transformed into permanent coverage and then sold as a life settlement.
ILIT Optimization: Life settlements can free trapped capital in irrevocable life insurance trusts (ILITs), allowing for better investment opportunities and fulfilling trustee responsibilities.
Fiduciary Considerations: Advisors have a duty to discuss options with their clients, including life settlements, to ensure that they are making prudent decisions about their assets.