What to Do When a Client No Longer Needs Their Life Insurance Policy
Many seniors find themselves with life insurance policies they no longer need or can no longer afford. Rather than lapsing or surrendering the policy for little to no value, there’s an alternative: life settlements and life advances. This process can transform an unwanted policy into immediate cash, offering financial flexibility and peace of mind.
If you’re an advisor or professional working with seniors, this guide will help you understand how to support your clients and how life insurance settlements can benefit both of you.
Start the Conversation: Identify the Opportunity
Whether you’re meeting with a client about retirement planning, group insurance, or estate needs, asking the right questions can open up new possibilities. If a client mentions they no longer want their life insurance policy or find the premiums too expensive, that’s your opportunity to introduce life settlements and advances. Life settlements are an outright policy sale available for Quebec residents while outside of Quebec, policy holders can leverage their policy for a life advance.
Explain to your client that a life insurance policy is a valuable asset that can be sold for cash or borrowed against, often for significantly more than its surrender value. By discussing this option, you provide them with a solution they may not have considered.
The Life Settlement Process Made Simple
Helping your client navigate a life insurance settlement may seem complex, but it’s a straightforward process with expert guidance. Here’s what it involves:
- Initial Review
Start by gathering the basic policy details. A life settlements expert will assess the policy to determine its viability. Factors like the client’s age, health, and policy type will be considered. - Application Submission
The client completes a short application, including medical release forms. - Medical Records and Policy Underwriting
Buyers evaluate the client’s medical records and policy details to estimate life expectancy and the policy’s value. While this part of the process can be time consuming due to collaborations with the client’s healthcare providers, it often results in a significantly higher cash offer than surrendering the policy. - Offers Made
Once underwriting is complete, offers are presented to the client. - Contract and Document Submission
If the client accepts an offer, the sale contract is finalized, and necessary change documents are completed and forwarded to the insurance company. Once the insurer processes the changes and provides the confirmations, the client receives their payout. - Completion
The client receives their money, typically within a day or two of the sale’s completion.
Why Life Settlements Make Sense
According to industry statistics, 80% of life insurance policies lapse or are surrendered and never pay out any death benefit. Selling a policy through a life settlement can generate up to six times the cash surrender value, providing significant financial relief.
Common Scenarios Include:
- Seniors who can no longer afford high premiums.
- Policies that are no longer needed, such as those tied to a spouse or dependent who has passed away.
- Policies with minimal cash value that would otherwise be lapsed or surrendered.
Real-World Examples
- A Canadian Senior with Rising Premiums: An 83-year-old man with a $250,000 universal life policy was paying $8,500 annually to maintain it. By leveraging a life settlement, he received $65,000—a significant windfall compared to letting the policy lapse for nothing.
- Family Financial Relief: An 89-year-old man with a $150,000 policy no longer needed coverage after his wife passed. He sold the policy for $41,000, relieving his sons of premium costs and providing financial support for his family.
How to Talk to Your Clients About Life Settlements
Many clients are unaware of this option, so it’s important to educate them in a clear and supportive way. Here’s how:
- Ask Directly: During financial reviews, ask if they have any life insurance policies they no longer need or can afford.
- Share Resources: Provide easy-to-understand materials, such as brochures or email guides, explaining life settlements.
- Stay Proactive: Reach out to clients with a simple newsletter or letter explaining how a life insurance settlement could benefit them.
- Leverage Your Network: Inform your referral partners, such as financial planners or lawyers, about this option so they can connect you with potential clients.
Why Work with a Life Settlement Expert?
Navigating the life settlement process can be challenging without the right support. Experts bring value by:
- Simplifying Complex Processes: From gathering medical records to submitting premium projections and legal authorizations, the paperwork involved in a life settlement can feel overwhelming. Experts handle these tasks efficiently, saving time for both you and your clients.
- Navigating Strict Canadian Regulations: Life settlements are highly regulated in Canada to protect consumers. Experts are well-versed in these regulations, ensuring every step of the process complies with provincial laws and avoids pitfalls.
- Providing Unbiased Advice: A skilled expert evaluates each policy and presents transparent options tailored to the client’s specific circumstances.
- Ensuring a Seamless Experience: From the initial consultation to the final payout, life settlement experts act as a guide and advocate, making the journey smooth and stress-free for all involved.
The Bottom Line
Life settlements can be a lifeline for seniors who no longer want or need their policies. For advisors, they’re an opportunity to provide valuable solutions while building stronger relationships and earning commissions.
With thousands of policies surrendered or lapsed each year, there’s enormous untapped potential. By starting the conversation, you can help your clients uncover hidden value in their life insurance policies and make the most of their financial resources.
Take the time to learn more, partner with a life settlements expert, and give your clients the guidance they deserve.
Are you considering a life settlement for your life insurance policy? Wondering if you’re eligible to sell your life insurance policy? Learn more about selling your policy and find out if you qualify for a life settlement by contacting the experts at Canadian Life Settlements today.
