September 20, 2021
September is Life Insurance Awareness Month, which serves as a valuable reminder that life insurance is an important part of any financial plan. From educating about policy types to helping select prudent levels of coverage, advisors help clients navigate the sea of options to ensure their long-term financial goals are met, and just as importantly, that their loved ones will be protected. But just as awareness of the need for life insurance is important, awareness of when life insurance may no longer serve its intended purpose is vital, too.
There are many reasons why a client’s need to maintain a life insurance policy might have changed. Perhaps the policy originally served to protect a family business, but the business has been sold. Or maybe the policy was intended to provide financial security for a young family, but now the house is paid off and the kids are grown and have kids of their own. Or maybe the policyowner needs money now for unexpected expenses in retirement. Whatever the reason, making sure your clients know their options when it comes to their life insurance policies is an important part of their financial plan.
92.5% of life insurance policies (by face amount) that terminated in 2019 didn’t pay a death benefit
Similar to a home, artwork, or jewelry, life insurance is an asset; the policyowner owns the asset, and has the right to sell it for its market value. Yet few are aware of the alternatives to surrendering or lapsing a policy. While these options provide little or no value in return, a life settlement pays the policyowner the market value for the policy, which averages four or more times the cash surrender value.
Life settlements can provide a significant lump sum payment to policyowners, which can be used for anything from retirement planning to covering healthcare expenses. The National Association of Insurance Commissioners (NAIC) even endorses life settlements as a way for seniors to plan and pay for increasingly costly long-term care expenses.
Advisors are utilizing life settlements to help clients get more from their life insurance policies—even healthy clients with no significant health impairments (if you have a healthy client interested in a life settlement, please contact us to get the most accurate estimate).
To begin the conversation with your clients, use Lighthouse’s life settlement estimate calculator to get an estimate of what their policies could be worth in a life settlement. While the calculator only provides initial estimates, it can be a good way to identify if a policy might have value in a life settlement.
During this Life Insurance Awareness Month, make sure your clients know their options when it comes to their life insurance policies. In many cases, a life settlement is the best financial decision.