Information for Financial Planners
Life Insurance and Life Settlement Information for Financial Planners
Selling one’s life insurance policy as part of a broader financial planning strategy may be a prudent business decision, but nonetheless a significant step for the policyholder. The individual will want to know that they can trust their financial advisor to recommend actions to meeting their changing needs.
Financial professionals have a responsibility to represent the seller’s interests in a life settlement transaction. Our history in this area has shown us that the best approach is with this responsibility is to engage in a methodology that includes the following four-step process
- Assess the client’s overall financial picture to determine whether a life settlement is an option. This process is often referred to as determining the "suitability" for a life settlement.
- Perform an analysis of the client’s probability for a life settlement. A simple toll would be to complete our simple application and allow for our team to provide a quick analysis.
- Perform due diligence by researching the marketplace for a reputable life settlement provider / broker who is backed by qualified funders;
- Pursue the highest market value for the seller by insisting on multiple offers from the life settlement broker.
Financial professionals can help their clients tap the liquidity that may be hidden in unneeded life insurance policies. But financial professionals should know that life settlements are not for everyone. At Integrity Capital Partners, we use the following criteria when working with advisors, producers and clients to obtain multiple offers for their policies:
- The policyholder must have owned the life insurance policy for at least two years.
- The policyholder must be over the age of 65 and have a life expectancy of 15 years or less.
- The policy must have a minimum face value of $250,000.
Broker Dealers Entering the Marketplace
As more and more broker-dealers enter the Life Settlement marketplace, registered reps are recognizing that they have a responsibility to the client to inform them of a Life Settlement. Although a Life Settlement is not always a securities transaction, registered reps believe it has relevance to their profession and that it is important to at least inform the client of the option
Due Diligence
Not only will financial professionals be expected to perform due diligence as it relates to recommending the Life Settlement to their client as a financial planning tool, but they may also be expected to perform due diligence on the brokers and firms handling the Life Settlement transaction. Integrity has been at the forefront of the changing and evolving state and federal governments review of this market and we pride ourselves on providing our clients with the most up to date information.
Charitable organizations who own donated life insurance policies may, with the donor's consent, pursue a Life Settlement on certain donated policies. A Life Settlement is simply the sale of a life insurance policy on the secondary market for an amount greater than the cash surrender value but less than the expected death benefit of a policy or certificate. The proceeds are unrestricted and can be used or invested in any way. In order to qualify for a life settlement, the insured should be generally over the age of 70, and the policy should have a minimum
face value of $250,000.
