January 04, 2022
When your senior clients are searching for new ways to fund their retirement planning, you may be able to deliver the news they’re hoping for – that you’ve found overlooked value in an asset possibly sitting somewhere in a drawer. A simple life insurance policy appraisal could be the difference between your clients covering their current healthcare needs and them wasting value on an outdated or unneeded policy.
Michael Coben, Chief Distribution and Business Development Officer at Lighthouse Life, speaks with Melanie Yuill about how advisors can discover the hidden value in their clients’ life insurance policies through policy appraisals, and the value a life settlement can provide for policies that are no longer needed or are no longer affordable. Learn how a life settlement could potentially generate up to four times the cash value of the policy for your clients.
Michael Coben, Melanie Yuill
Melanie Yuill 00:03
We’ve all heard the stories about someone who finds an old knick-knack, vase, or painting in their attic that ends up being worth an unexpectedly large amount of money. Well, Mike Coben, who heads up Business Development at Lighthouse Life is here to explain how people can find the hidden value within their life insurance policy that may be just sitting in their drawer.
Mike, how does this work?
Michael Coben 00:22
Well Melanie, typically when people buy life insurance, they buy it and they put their policy in a drawer and they really never look at it until many years down the line. And they could be sitting on a significant amount of lifetime value that they may not even realized that they have access to.
It’s very similar to if you bought an antique and you put it in your attic and the antique was a painting and you think ‘well, you know, I don’t know if I ever use this antique. I’m not sure where it fits in the kitchen.’ But lo and behold, the day that you sell the house you find the antique again, the antique painting again, and you bring it out and you get it appraised and it turns out to be a valuable Van Gogh and you sell it for a tremendous amount of money that you can utilize for moving, retirement expenses, etc.
Well, life insurance could be similar in terms of having value that you don’t really know until the policy is appraised. And life insurance can be appraised for a market value that could exceed a significant amount above what the insurance company typically could provide in its surrender value or, you know, possibly just lapsing for very little value at all. And that process of appraising a policy and selling it to institutional purchasers is called a life settlement. And it’s really for seniors that have changing needs and they bought the insurance for good means at inception, whether it was for spousal protection, for business insurance, and then down the road they decide they don’t really need the policy or want it, or can’t afford it anymore and they have an exit strategy that could provide significant revenue for them that will take care of current needs, such as healthcare or retirement income needs.
Melanie Yuill 02:06
Okay, so you said that this is good for seniors. So it sounds like everyone who has a life insurance policy that isn’t the best fit for, so who is the best fit for this?
Michael Coben 02:15
So typically, it’s insured’s or policyowners that are 70 and above that, as I said earlier, have deemed that their policies are too expensive to continue or their needs have changed and they really don’t need the insurance anymore.
Melanie Yuill 02:31
Okay, and realistically, how much money can a person get if they sell their policy in a life settlement?
Michael Coben 02:36
That’s a great question and it’s very difficult to answer because it depends on the individual circumstances of the policy and the individual that’s the insured.
But the industry has seen that the value generated from a sale of a policy, if it does have market value is significantly more than what the insurance company provided. Significant in the tune of four times greater than what potentially the value is in the policy itself from the values from the insurance company.
Melanie Yuill 03:02
Okay, so if people can get that much money, why aren’t more people doing this?
Michael Coben 03:06
Lack of awareness. Companies like Lighthouse Life, which I represent, are really geared for educating the general public in terms of greater knowledge of the marketplace, or the existence of the marketplace, and also spending a lot of time with advisors. Anyone that’s advising a client on their financial affairs, inclusive of life insurance, we are, as an industry and as a company really spending a lot of time educating advisors in providing this valuable option to clients that may not even understand or realize that they have some significant value that is sitting in their attic that they’re just letting their value be unrealized.
Melanie Yuill 03:52
So, what do you recommend the policyholders do, what should advisors be doing for them?
Michael Coben 03:56
So, I would suggest that if a senior becomes aware of the fact that they don’t really need their life insurance anymore, they can’t afford their insurance, they should approach their financial advisor to investigate this exit strategy as a possible exit strategy.
Also, as a financial advisor, if a client approaches them and says, you know, ‘the policy I purchased in the past I don’t really necessarily need, or want, or can’t afford, of I have a need to fund a shortfall in retirement’ as they may be discussing currently with their advisor, or needs for funds to take care of current health care or long-term care costs, that’s when an advisor should say ‘based on your current circumstances, I think we should consider valuing your policy and seeing if it has a market value that we could use for your needs today.
You know, as I said earlier, it’s like digging the painting out of the attic and realizing the value and utilizing the value for your current needs. Just getting it out of the drawer instead of the attic.
Melanie Yuill 04:52
Alright, thanks Mike! I appreciate you taking the time to explain this to me. Thank you very much. And if you would like more information on how you can find the Van Gogh in you attic, visit LighthouseLife.com.
To get started valuing a life insurance policy through appraisal, use the Lighthouse Life Settlement Estimate Calculator to generate a free estimate. This is a great way to open a dialogue with your clients about unrealized value sitting right under their noses.