6 minute read
More Seniors Should Be Selling Their Life Insurance Policies
Serve Your Clients – Build Your Business
BY LISA REHBURG
Please know that I am not here to talk anyone out of their life insurance policy. If your client wants and needs their policy, they should keep it. That said, so many people don’t need their policies any longer, or the policies become too expensive to maintain.
FACT: 2.5 million seniors lapse or surrender their policies annually. Only a few thousand sold their policies last year. It should have been a lot more. According to the Life Insurance Settlements Association (LISA), more than $100 billion of face value are lapsed by seniors over age 65 each year. This figure does not even include policy surrenders – this is just lapses.
This begs the question – why?
Clients simply do not know that there is another option. They don’t know they can sell their life insurance policy, and receive cash for it.
Starting several years ago, LISA began collecting data on the life insurance settlements market. Their members, representing 95% of the market, submit data regarding the number of transactions, face amount of policies purchased, etc.
Here is a synopsis of the data for 2022:
~ 3100 life settlement transactions completed
~ $770 million paid to consumers for the sale of their unwanted life insurance policies
~ $610 million more than the amount consumers would have received if their life insurance policies had been lapsed or surrendered
~ 5 times higher than the cash surrender values offered by the life insurance carrier $250,500 more in American’s pockets, on average, for the completion of their life settlement
Obviously, there are 2.5 million reasons a year why clients may wish to get rid of their policies, but ultimately, the policies are unwanted, unneeded or unaffordable. Over time, life changes, and the reason a client purchased a life insurance policy may no longer be a concern. Perhaps a spouse has passed away, the kids have moved out of the house, the house is paid off, etc. A term policy may be ending or the policy may not fit into their budget any longer. Clients feel as if they have no other option but to lapse or surrender. They are unaware that an alternative may be available, including the sale of the policy.
Clients also may not consult their advisors before lapsing or surrendering. Or, advisors may also not fully understand life insurance settlements, or have misperceptions about how the market operates.
Think about the differential in the numbers — that is a very large gap between 2.5 million and 3,100. Clients are missing out on a lot of value for their policies, and advisors are missing out on another opportunity to serve a client and build revenue for their business.
To be clear, not all 2.5 million policies could be sold. Some of these policies are too small to be sold (final expense policies), clients too young and healthy, cash values very high relative to the face, or policy loans are high — to name a few reasons. But many more than 3,100 should have been sold.
Case study
Consider the 72 year old client with a $1,000,000 universal life policy. There is $6,000 in cash left in it. The premium to continue the policy is $2,500 per month. He did not want to afford those premiums. The options? Restructuring the policy did not make sense. Surrendering the policy would bring $6,000. Instead, his financial advisor advised considering a life insurance settlement. The result? The doctor received $150,000.
Besides helping benefit a client, selling a policy benefits the referring insurance or financial advisor. There are commissions on the sale itself, but also additional product sale opportunities.
What about the scenario just described? If he was your client, and now has $150,000, would he need other products (such as annuities, or long term care insurance) that you offer? Perhaps.
You do not need to be a life insurance expert or the writing agent on the life insurance policy, to help your client. These clients could be your Medicare clients, small group business owners, next door neighbors, family members, parents of your individual clients, etc. And you can help give them “found money” from a “hidden asset.” Policies do not need to be million dollar policies either. Buyers will consider face values of around $100,000, so this opportunity is available for many clients.
No one is trying to talk anyone out of their life insurance policy. Clearly, there are many options available for clients: restructuring the policy, beneficiaries paying the premium, reducing the death benefit, just to name a few. If a client wants to keep their policy, they should. However, if a client has decided that lapsing or surrendering the policy makes the most sense for them, please consider one more option — selling it.
90% of seniors surveyed said had they known about a life insurance settlement, they would have considered it.
That is what this is about — giving clients all of their options — so you and they, can make the best decision for them and their family.
Remember, the life insurance settlements market is legal and highly regulated by Departments of Insurance across the country. And, if offers are made on a policy, clients are under no obligation to sell.
Life settlements can make good sense for your client – and you, too.
Lisa Rehburg is president of Rehburg Life Insurance Settlements, a life insurance settlements broker. Lisa is passionate about assisting financial, insurance, legal and non-profit professionals to help their clients benefit from their unwanted or unneeded life insurance policies. She has been in the health and life insurance industries for over 30 years.
Lisa has presented to hundreds of organizations, including various Financial Planning Associations, Fiduciary Associations, Estate Planning Councils, Planned Giving Roundtables, NAPFA, NAIFA and Health Underwriters Associations, to raise the visibility of life insurance settlements as an option for clients, when appropriate. She has held executive roles at carriers, general agencies and TPAs.
Lisa earned a Bachelor of Arts degree in Finance and a Master of Arts degree in Organizational Development.
714-349-7981
www.rehburglifesettlements.com
Questions health insurance professionals can ask their Medicare clients:
• Now that we have you on the Medicare plan that best meets your needs, I wanted to ask you about other issues you may want help with.
• Do you have a life insurance policy that is unwanted, unneeded or unaffordable?
• Did you know that your life insurance policy (any life insurance policy, including a term policy) is an asset that can be sold?
• Were you aware that life insurance policies can be worth tens of thousands or hundreds of thousands of dollars by selling the policy?
• I work with experts in this area. Would it be helpful for you to reach out and we can speak with them?
To explore your client’s need and find the right SME to help you, contact:
The Collaboration Center @ 657-229-2849
