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Who to Engage...

While certainly episodic, the opportunity to monetize an unwanted or surplus life insurance policy is more frequent - and of greater value - than most wealth advisors and even life insurance producers are aware.

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Most basically, just knowing to respond to a client's inquiry about an interest in a life settlement and the variables of a policy likely to have value to investors will ensure that you can at least be responsive to the opportunities borne of a client knowing to ask - and to do so in the most transparent, effective, and lowest cost way. But, given 10% awareness among policy owners of life settlements, you'll likely miss the other 90%.

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So, we'd be humbled to assist you with the 10%, but we'd love to work with you to ensure that the other 90% don't unwittingly lapse or surrender a policy that might have garnered significantly greater proceeds in a sale.

UL/VUL/Term

policy types

<72

if less than healthy

>72

if healthy

>$500,000

policy size

Your Engagement is Everything

More than 85% of permanent life insurance is forfeited rather than paying a death benefit. Even among the HNW/UHNW.

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Why? Because, for any number of reasons, and, often, a combination of reasons (see below for examples), the utility of a policy, as the need for protection or other benefits originally envisioned for the policy change, having declined such that it no longer makes sense to maintain the policy.

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In 2/3rds of those cases among older HNW insureds, the policy would sell at a significant premium to its surrender value, often for hundreds of thousands and even millions of dollars.

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But, given the low awareness among policy owners - and mostly only knowing what those firms that advertise on TV describe - relying on your clients to engage you about the options is likely to result in a significant number of foregone opportunities to extract liquidity from the unwanted or surplus policy...some of which could be financially substantial, like these examples.

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Step One

Identify and Catalogue Policies

If a wealth advisor, simply ask clients what policies they own and catalog them. If a life insurance producer, track policies for patterns that suggest that the utility of a policy may be declining (e.g., the owner no longer paying premiums, cash value approaching zero, etc.).

Step Two

Assess the Utility of Policies

Discuss the relevance of all policies to the client's broader objectives and whether, given their cost, they makes sense to maintain until the next review. Ideally, this would be accompanied with a performance review to determine whether a different policy would more cost effectively achieve the desired coverage.

Step Three

Discuss Options

For those policies that are no longer of sufficient utility to justify keeping the policy in force (or that are observably nearing a lapse or surrender) or a term policy approaches maturity,  discuss settlement as an alternative to a lapse or surrender.

Step Four

Annual Review of Term and >70

Review term policies as they approach their conversion dates for conversion options, if your client might benefit from a) permanent coverage, b) a conversion & settlement of the policy. Also as the insured advances into the 70's and beyond, include an annual secondary market valuation as part of the insurance review, to ensure that the policy owner can incorporate into a "buy sell hold" analysis an understanding of the policy's value.

Strategically Engage Clients

anticipate the opportunity...

We do not advocate for life settlements, per se, but rather for a rational solution to monetize those policies that you and your client determine either no longer make sense to maintain, independent of any other analysis, or, that the proceeds of a settlement are of a higher utility than the policy itself.

 

With even just a bit of awareness, process, and proactive engagement, you can ensure that your clients never unwittingly forego what may very well be a substantial windfall from an asset into which they have paid significant money but no longer makes sense to maintain.​

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If you'd like to learn more about how we could work with you to institutionalize this process, please reach out. We'd love to be of service.​

Policy

  • Premium fatigue

  • Relative affordability (individual and Trust)

  • Increase in Cost of Insurance (COI)

  • Poor performance (ILIT – remediation process)

  • Premium financing has become too expensive

  • Unnecessary/unwanted policy transferred from business/buy-sell, etc.

Life Events

  • Retired, with buy/sell agreement policy transferred

  • Key-man policy transfer to owner unnecessary for estate

  • Need or preference for the liquidity of a sale

  • Outlived need/living longer than modeled when purchased

  • Access to superior return assets with premium $

  • Desire/preference to fund something with proceeds from a sale

Estate

  • Change in estate/over-insured

  • Change in beneficiaries

  • Outlived utility of/need for policy (e.g., death of heir)

  • Desire to distribute/use proceeds prior to death

Simply Be Aware

Knowing what to look for - about even just the existence of policies, life events and milestones in their lives, or estate changes that may impact the utility of a policy - and applying basic processes to regularly engage those clients about them, you can likely ensure that clients are only maintaining those policies that contribute in some way to broader objectives and/or responsibly explore a sale in those instances that maintaining those policies no longer makes sense.

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