Life Settlements

Find the Best Life Settlement for Your Client

As the life insurance and financial services markets continue to grow and evolve, clients expect more options and transparency than ever before. However, many clients still need help understanding these markets and the solutions available to them. As an insurance agent or financial advisor, helping your clients understand and navigate some of the lesser-known options on the market can be a great way to grow your business and create the best outcome for your clients. Life settlements are powerful solutions that are growing in popularity.

What is a life settlement? 

A life insurance settlement is the sale of an individual life insurance policy on the open market for a cash payment. The cash sale during a life settlement is typically less than the death benefit but more than the surrender value of the policy. The proceeds from a life settlement are taxable at a variable rate that depends on the size of the payment and the client’s financial situation, including their adjusted gross income and tax bracket.

The buyer of a life insurance policy becomes the beneficiary and is responsible for paying all future premiums.

Life settlements are distinct from viatical settlements. Viatical settlements are an outdated means of selling a life insurance policy by an individual who is terminally ill. Modern life settlements are more regulated than early viatical settlements which carry a stigma for predatory practices. 

While life insurance settlements are not right for everyone, they are a legitimate financial tool that can be considered in a variety of situations.

Is a life insurance settlement right for my client?

As an agent, you should be sure to educate all of your clients, especially those who are elderly, about life settlements. Many people over the age of 65 experience significant changes to their financial situation due to retirement, medical expenses, assisted living costs, and more. Selling a life insurance policy can help cover these costs, especially if the need for a life insurance policy does not exist anymore. By informing your client of the life settlements options, you can also avoid any potential future litigation if your client is negatively impacted financially because they were unaware of the option to sell their life insurance. 

A common scenario is when an elderly client no longer needs their life insurance policy because their children have become independently financially successful. The client may be anticipating costs associated with assisted living or some other expense that may be difficult to meet on a fixed income. By selling their policy, they could receive a one-time payment that is several times larger than their existing policy’s value, thus alleviating any future financial concerns.

Talk to a sales director about your client’s situation.

How do I find the best life insurance settlement for my client?

Because of the complexity of the life settlements process, it is advisable to work with a brokerage general agency (BGA). BGAs are wholesalers of insurance products.  They specialize in helping insurance agents and financial advisors find and execute customized solutions for their clients. Working with a BGA is a great way to understand how life settlements work so you can offer them to your clients.

When seeking to sell a life insurance policy, an advisor working alone typically has access to at most three buyers. A good BGA has access to dozens of buyers nationwide. They also have the knowledge to help the advisor get the best offers for their client’s policy.  BGAs can advise agents on which clients are a good fit for life settlements. In other cases, they provide guidance on the minimum age requirements, policy size, policy structure, and the paperwork required.

Furthermore, a BGA will help execute a life settlement, including helping agents complete the necessary paperwork, working with the insurance carrier, and sending the information to buyers. From there, the policy is bid on by multiple buyers, and the client can choose the best offer for them. By working with a BGA throughout this process, on average, clients will receive offers that are 30–32% higher than market averages because there are dozens of buyers. 

In short, a brokerage agency will carry the weight and help to facilitate the process in exchange for compensation for the buying entity, meaning that the client does not pay any fee for the service.

How do I find the best life settlement BGA?

If you are considering life insurance settlements for your clients, you will want to find a full-service brokerage general agency with experience in high-end financial planning. You can start by asking for referrals from your network and insurance broker associations such as NAIFA.

You can also do your research by prospecting insurance brokerage agencies that serve your area. Look for these qualities in a broker:

  • Responsiveness and attentiveness. Are they getting back to you and addressing your questions promptly?
  • Product knowledge. Do they understand the market and the right solutions to serve you and your clients’ needs? 
  • Back-office support. What happens after an application is submitted?
  • A good team instead of just a good salesperson. Make sure that the service is as good as the pitch. 

Who does a life settlement broker represent?

A settlement broker represents the client and the client’s interests. Make sure you ask questions about this and verify that the client is properly represented. 

Contact us and get the help you need to grow your business today.

EMG can help.

As a brokerage general agency, EMG Insurance Brokerage handles everything from submission to the commission. Our relationships with over 30 carriers allow us to help choose the best solution for your client. We will walk you through the process and help customize solutions for the unique needs of each client.

Our multi-generational team is experienced in the high-end planning market and knowledgeable on all the available products and solutions. We work with over 80 buyers to help you find the best fit for your client. Our sales directors help financial advisors and their clients nationwide navigate the whole process from front-end sales to back-office support.

Connect with us by phone, online, or in-person, and schedule a consultation with your sales director today to discuss whether a life insurance settlement is a good fit for your clients.

Join EMG Insurance Brokerage.

Complete the form below to get started with EMG Insurance Brokerage’s tools and services for insurance professionals like you. You may also call us at 1-800-477- 3548.