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With 10,000 Baby Boomers retiring each day and life expectancies rising each year, according to the Pew Research Center, studies show that millions of senior retirees—some of whom are your current clients—won’t have nearly enough money to meet their routine living expenses, not to mention the soaring medical costs as they age, which Medicare doesn’t begin to cover.
For your high-net-worth clients who may be over-insured, a life settlement may allow you to place them into a more appropriate policy while providing them funds for a variety of other uses.
We realize that carriers are discouraging their “captive” producers from actively participating in life settlements. However, it is important for you to exercise your fiduciary relationship as your senior client’s trusted insurance professional by discussing his or her current situation, and assessing both the advisability and viability of a life settlement. In some states, insurance laws make it mandatory for carriers to notify policy holders of the life settlement option as an alternative to surrender or lapse. It’s your responsibility to educate your clients of their options and extend their confidence in you.
Here is a quick checklist of determining factors you’ll want to take into account:
- Is your client 70 years of age or older?
- Is the policy in the range of $250,000 to $10 million?
- Is his or her life expectancy from 24 months to 15 years?
- Is his or her policy beyond the legal two-year contestability period?
- Is there a change in his or her circumstances since the policy was issued?
- Does your client need additional liquidity?
- Is there a financial emergency, medical issue, or sudden family need?
- Does your client or client’s spouse require long-term care or have to move to an assisted living facility?
To further assess, you’ll also want to consider the following:
- Can your client continue to afford the premiums on his or her policy?
- Is his or her term policy or rider about to expire?
- Is your client considering “lapsing” or “surrendering” the policy for any reason?
- Is your client’s insurance policy under-performing?
- Does your client currently need the policy, or has he or she outlived the beneficiary?
- Has the estate plan changed, or are you recommending changes for a variety of reasons?
- Is it in your client’s best interest to purchase a newer and more efficient policy?
- Are you selling a business or retiring or exiting from business with “key man” policies?