When was the last time you were offered the keys to a new market? One such market opportunity has emerged that serves critical financial needs across generational lines of both seniors and Baby Boomers. This market is accessed with no cost for advisors or consumers by monetizing a life insurance asset the consumer already owns through a life settlement.
Many seniors own life insurance policies that, after years of making premium payments, they will lapse or surrender without realizing their policy is actually an asset that has secondary market value. Unfortunately, too few policy owners understand this fact, and as many as 9 out of 10 universal life insurance policies will be abandoned before paying out a death benefit. For the senior market, this opens up a significant market opportunity: according to a Conning and Company study: $185 billion of death benefit is owned by seniors on an annual basis that could be exchanged in the secondary market for a new living benefit or cash instead of being lapsed or surrendered.
Over a decade ago, life settlements became a viable solution to pay for long-term care. This marked a shift in the marketplace opening up settlements to a larger, middle class population owning small face polices of under $1 million in death benefit that could be exchanged for “after-market” living benefits. It also showed that this was an evolving market during a time when the industry was evolving into the mainstream financial tool it has become today.
During this period, the settlement industry matured considerably with state regulations providing consumer protections and a number of uniform standards instituted across 45 states. Disclosure requirements about a policy owner’s right to access the secondary market value of their policy were passed and states began looking to this market as a way to help seniors pay for long-term care, delaying their need to go onto Medicaid. Today’s life settlement is a well-regulated financial transaction providing a number of consumer benefits that can help seniors struggling with the costs of retirement and long-term care. A life insurance policy can be exchanged for a variety of financial vehicles designed to address the unique needs of seniors including long-term care benefits, annuities, retained death benefits, or lump-sum cash.
Rescuing life insurance policies before they are lapsed or surrendered has been an overlooked opportunity by most advisors – but that is changing. Every day, more and more advisors are realizing these life insurance policies are a massive pool of assets sitting in the hands of seniors who often have no idea the value of what they own. Agents and advisors who are able to educate their senior clients on their options could help turn these policies into much needed financial solutions for seniors, and a welcome new revenue stream for themselves.
The insurance industry just isn’t what it used to be. Thriving in today’s market requires adaptability, responsiveness, and creativity. Advisors know they need to add innovative solutions to their toolbox as market conditions continue to evolve at a rapid pace. Those able to identify and harness market opportunities put themselves in the enviable position of creating new profit centers for their business.