December 01, 2021
Every year, millions of life insurance policyowners aged 65 and older lapse or surrender their policies for little or no value in return, despite the years of premiums they paid. An alternative for seniors—and one they are utilizing more frequently—is determining the fair market value of their policy for potential sale in a transaction known as a life settlement.
To help their senior clients understand and maximize the value of their asset, financial advisors are increasingly implementing life insurance reviews and policy valuations as part of their annual financial evaluation process . This allows advisors to stay current on their clients’ need for the policy, and to act in their best interest to reclaim some of the value of the policy if the need for coverage has changed.
A policy review can be completed in a simple, three-step process:
Combined with information from the Discovery phase, this material will serve as the foundation for the review.
If the review indicates that the policy is at risk of lapsing due to deviations from the original illustration, a substantial premium increase is on the horizon, or is just not meeting your client’s goals, then exploring avenues to reallocate funds is the appropriate action to take.
To begin the conversation with your clients, use the life settlement estimate calculator below to get an estimate of the fair market value of their policies. 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 transaction.
Like any asset in your clients’ portfolios, a life insurance policy should be reviewed on an annual basis to ensure that the coverage is appropriate and that the policy still meets financial objectives. Recommending and assisting clients with an annual review, especially when the policy is at risk of lapsing or being surrendered for little to nothing in return, is the best way a financial advisor can maximize the value of a life insurance policy for their clients.
To learn more about adding life insurance policy reviews to your annual review plan, or for tailored assistance with the process, contact us today.