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In today’s market, life insurance is becoming recognized as a “buy and manage” asset, not a “buy and hold” asset as it has traditionally been perceived. A life settlement is one way advisors can help policy holders manage their asset to its best performance. In a recent article, Henry Montag lays out some specifics to guide you and those who trust you in determining what options are best when it comes to maintaining life insurance, letting it lapse, or choosing a life settlement.
Ultimately, an advisor is in the best position to inform a policyholder of the life settlement option. As Montag notes, many insurance agents are forbidden from discussing the life settlement option, as it prevents policies from lapsing and thereby reduces the profitability of the insurance company.
Many individuals are not aware that their life insurance could expire prematurely if the cash value falls below a certain threshold. For individuals who purchased policies in the 80s and early 90s, premiums were set based on the high interest rates at the time. As those rates have decreased, if the holder of the policy hasn’t increased their premium payments to compensate for the loss, their policy could be pulled out from under them.
In other cases, trustees (most commonly eldest children, as Montag points out) continue to maintain policies by paying premiums when your client may be terminally ill or have no need for the insurance. In this case, it’s your role as an advisor to step in and ensure trust assets are not wasted, but rather optimized.
A change in a policyholder’s health is a time when dollars can be saved by ceasing to pay into the policy premiums. But why not consider a life settlement instead? There are many situations where a life settlement could be a great option. To find out if your client could be helped by a life settlement, visit our qualification calculator.
I would be happy to answer any questions you might have about this, or any other life settlement topic. I can be reached at 888-849-0887 or llagrotte@lsa-llc.com.
