Life Settlements for Life Insurance Agents, Financial Advisors and Professional Advisors
This article is written to explain how life settlements can be of immense benefit to a Client and the professional advisors that work with them on a daily basis. Our goal is to provide relevant information that is aimed at educating and enlightening you on the benefits of introducing Life Settlements into your practice and using Settlement Masters to protect you and your clients.
The History of Life Settlements
A Life Settlement is not a new concept. In fact, the very foundation of a life settlement started with judicial support back in 1911 when the U.S. Supreme Court ruled an insurance policy is personal property that could be sold like any other asset. Today, we define a life settlement as the sale of an unwanted or no longer needed life insurance policy insuring a person(s) with some medical impairment but not considered terminally ill.
The industry began to expand and take shape in the late 1980’s with the use of viatical settlements – the sale of a policy insuring a person that is determined to have a 2 year or less life expectancy. Over the past fifteen years, professional investors such as pension funds and hedge funds incorporated the use of life settlements as an alternative investment because projected returns can be scientifically analyzed and not correlated to traditional investments like stocks, bonds or real estate.
Life Settlement Benefits to the Insurance Agents and Financial Advisors
Offer more services and options: Expanding your tool chest to include Life settlements will enhance your client relationships and differentiate you from others in your field as few Insurance Agents and Financial Advisors are aware of how to advise clients about a life settlement option.
Additional Revenue: When the client sells a policy and receives cash they typically invest that money with the advisor in a managed account or annuity. They may also use the proceeds to acquire additional insurance coverage such as long-term care coverage. Settlement Masters also shares compensation with you from the life settlement transaction.
Compliance and E&O Coverage: Settlement Masters has developed a process for handling life settlements that includes outlining options to keep a portion of or all the policy death benefit and a chronology of the transaction which provides a level of compliance unmatched by other brokers. The benefit to you is our ability to extend our E&O protection to you.
Non-Compete Agreement: Settlement Masters understands the importance of the client relationship. We execute a Non-Compete Agreement with you to clearly delineate the client is your client and remains your client during the entire settlement process, regardless of whether the settlement is completed or not.
Life Settlement Benefits to the Professional Advisor – Attorney, CPA or Trust Officer
Fiduciary Duties: Professional Advisors quite often act in a fiduciary capacity over the life insurance policy. As the fiduciary, you are held to the highest of standards. The Settlement Masters compliant process is unmatched by other brokers.
Reasons a Client May Want to Explore a Life Settlement
Client has outgrown the need for the policy: Most likely when the policy was purchased, the client was motivated by the desire to provide financial security for someone in the event of his/her death. Today, because savings are sufficient, or the family members needing protection are grown and independent, you realize the protection is no longer needed.
New goals within the client’s life plan: One thing we know with certainty is that life is not static, and it comes with opportunities as well as speed bumps. A life settlement may be a way for a client to increase his/her retirement assets or enable a loved one to receive an immediate benefit from the proceeds.
The life insurance policy hasn’t performed as expected: Many of the policies sold over the past 30 years used non-guaranteed assumptions to project future policy values. Economic conditions have surely caused insurers to reduce the earnings of the typical policy. These same conditions may have an impact on the ability of the client to meet the premium required to maintain the coverage on a go-forward basis.
Estate tax and business continuation plans have changed: Life insurance is an integral component to most estate and business succession plans. The current estate exemption of $11+ million places less emphasis on maintaining estate liquidity insurance. Business owners and executives typically maintain insurance on their lives to protect the business. When the business is sold or the executive leaves his/her employer, the ability to convert the insurance to cash becomes extremely valuable.
Eligibility for a Life Settlement
Key factors to consider for eligibility:
- Age of the Insured(s) – should be 65 years of age or older.
- Medical History – Insured(s) should have some medical impairments which can quickly be ascertained by our experienced staff and with your help.
- Minimum Death Benefit – to deliver the value of the Settlement Masters Process, we prefer a policy with a minimum death benefit of $250,000 or greater. We can also aggregate multiple policies so the combined death benefit is $250,000 or greater.
Not sure if you have a client that qualifies for a life settlement?
Why Settlement Masters?
Professionally trusted company: While Settlement Masters was formalized in 2008, Robert Larsen, the principal of the firm, has 50+ years of experience working hand in hand with insurance agents, financial advisors and other professional advisors.
Clear and simple process: At the outset of each life settlement, we establish a timeline for completion based upon our process. We provide weekly updates on the status of the case and adjust the timeline as necessary.
Complete Transparency: Settlement Masters handles the negotiation of offers, reporting of all offers, negotiating of all fees, and preparation and execution of all closing paperwork on your behalf. The completion of our Compliance File supports our level of transparency.
How does it work with Settlement Masters?
We’ve strived over the years to create a very transparent process that is easy to follow and understand. However, we believe there are several key talents we possess that separate us from others.
Informal Appraisal: This is our internal calculation of the potential market value of the policy based on the eligibility information. This allows the client to determine very quickly if it makes sense to move forward into the process.
Keep versus Sell Analysis: An outline of “what if” scenarios for the policy, including death benefit changes, premium contribution variances and alternative investment options for the sale proceeds. This educates the policyowner on ways to keep all or a portion of the death benefit.
Medical Impairment Underwriting: Medical records are gathered and reviewed to establish the insured(s) life expectancy calculation. All costs for this step are absorbed by Settlement Masters as part of our value proposition.
Formal Bidding: Settlement Masters actively markets the insurance policy to institutional buyers. All offers are reported to the policyowner as received. Settlement Masters also negotiates the fees and expenses associated with the transaction.
Closing Documentation: Settlement Masters prepares and coordinates the execution of all documents necessary to complete the transaction. An integral part of this step for our staff is the immediate processing of the change of owner and beneficiary which triggers the release of sale proceeds from escrow.
Compliance File: Upon completion of the life settlement, the Compliance File is finished and delivered to the policyowner, insured, advisor(s) and reports to the policyowner.
Have more questions? See The Settlement Masters FAQ’s
Make Settlement Masters your Partner Today
There is a tidal wave of seniors turning 65 every day. The Unified Credit doubled to $11.2 Million per person and insurance companies are raising the Cost of Insurance on inforce contracts. In addition, 6 states (to date) are mandating insurance carriers to notify clients who want to cash in or lapse their policies “that a Life Settlement is an option.”
Now is the “Perfect Storm” for clients who are considering abandoning or dropping out of their insurance to be given transparent, compliant information regarding Life Settlements.
At Settlement Masters we keep it simple and authentic. Please contact us today to learn more about our life settlement process.
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