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THIRD QUARTER 2016
NEWS YOU CAN USE FROM THE EXPERTS AT LLIS
“Advisors should never allow clients to surrender a permanent life insurance policy or let a convertible term policy lapse before looking into a life settlement,” cautions Judith Maurer, Founder of LLIS. Why? Because there may be value hidden in the policy that could change your client’s life.
It’s the sale of a life insurance policy that’s no longer needed or wanted by the policy owner and beneficiaries. Both convertible term policies and cash value policies are eligible for life settlements. They work as an insurance planning tool because a policy is a contract and may be bought and sold.
But you probably haven't heard much about life settlements recently. That’s because the life settlement market came to a virtual standstill in 2009. Improved life expectancies made it harder to sell a policy unless the insured person was very old or very sick. And there simply wasn’t money available in the secondary market to spend on unwanted policies. But the institutional funds that buy policies have recently had large capital infusions and are aggressively increasing prices for old policies. Life settlements are back!
An advisor came to us with a 59-year-old male client who was going to drop a policy; he had other insurance coverage, was ill, and figured he just didn’t need it anymore. Underwriters determined his life expectancy to be between 36 and 51 months. His policy was convertible term insurance (meaning it had an option to convert the term coverage to permanent coverage) with a death benefit of $2 million. We reviewed several options with him and his advisor, he decided to proceed with the sale, and he ended up with a net amount after commissions of $1,165,600. The life settlement allowed him to enjoy watching his heirs spend their gifts while he was still alive.
We, as team members, don’t. We’re all salaried. LLIS, as a company, does receive commission on traditional policies, but not on low-load policies (which we recommend any time they are available). Because of our low-load business model, we negotiate our fully-disclosed compensation with the funder on each transaction. Your clients should always receive more value for their policy working with LLIS than through a traditional broker. Fees will vary based on the complexity of the case.
You may wonder what the life settlement process looks like. Well, it starts off with a limited number of life insurance agents who must be approved to engage in the LS business, and some states require special endorsements to insurance licenses. Judith Maurer, founder of LLIS, has that approval and gets the licenses as needed for your clients. Since LLIS provides these services only for fee-only financial advisors and their clients, our process may be a bit different than others. Here’s a typical LLIS life settlement process:
If you’re thinking life settlements almost never work, here are a few other LLIS-facilitated examples for you:
Male age 76 wanted to make a donation to build a building at a private school.
Male age 73 with a terminal illness diagnosis and a $250,000 UL policy.
Male age 69 sold a $50,000 whole life policy with a $200,000 term rider for $32,000.
Female age 71 with both cognitive and physical impairments.
Male age 67 with business loans and a desire to retire.
Female age 81 in good health planned to surrender her $1million UL policy for less than $10,000.
There are other options available to clients who have policies they no longer want or need if:
The sale of a life insurance policy may be a taxable event. Advisors and their clients should seek tax advice regarding their individual circumstances.
There are a couple of websites I recommend for advisors to learn more:
Life Insurance Settlement Association (LISA): www.LISA.org
Judith Maurer has been facilitating life settlements since 1998. She’s available to consult with you and your clients. A quick call can determine if a life settlement is even a possibility for a client. You can reach her at: 877-254-4429 and judithmaurer@LLIS.com.
SOLUTIONS AVAILABLE THROUGH LLIS
Term Life Insurance | Low-Load Universal Life (Individual & Survivorship) | No Lapse Guaranteed Univeral Life (Individual & Survivorship) | Long Term Care Insurance | Disability Insurance | Critical Care Insurance | Low-Load Variable Annuity | Immediate and Fixed Annuities | Low-Load Variable Universal Life | Hybrid Life/LTCi | Hybrid Annuity/LTCi
(We recommend low-load permanent life insurance and annuities when possible)
(Not all policy types available in all states)For a list of current providers, visit the Advisor Tools section of our website and click on "Insurance Companies We Work With".