Unlocking Hidden Wealth: How Life Insurance Settlements Can Transform Financial Planning

Many clients hold a variety of assets—homes, cars, stocks, bonds—but one asset often overlooked by financial and insurance advisors is the life insurance policy itself. While life insurance is primarily seen as a safety net for beneficiaries, it can also serve as a valuable financial planning tool. Life insurance settlements offer a way to unlock hidden wealth from policies that clients no longer need or find financially burdensome.

This post explores how life insurance settlements can benefit both clients and advisors, illustrated by a real-life example. It also invites you to learn more through an upcoming webinar designed to deepen your understanding of this financial option.

What Are Life Insurance Settlements?

A life insurance settlement occurs when a policyholder sells their life insurance policy to a third party for more than its cash surrender value. Instead of lapsing or surrendering the policy for little or no return, the policyholder receives a lump sum payment or ongoing cash flow. This option is especially useful for clients who no longer need their policy or find the premiums too costly.

Benefits for Clients

• Higher Returns: On average, life insurance settlements provided about 6.5 times more money than surrendering or lapsing the policy last year.

• Additional Liquidity: Clients gain immediate access to funds that can be used for healthcare, living expenses, or other financial needs.

• Improved Quality of Life: The extra money can relieve financial stress and improve lifestyle options.

  
  

Benefits for Advisors and Agents

• Fulfilling Fiduciary Duty: Offering life insurance settlements shows a commitment to acting in the client’s best interest.

• Generating Revenue: Advisors can earn commissions from the sale of the policy.

• Opportunities for Additional Sales: After the settlement, clients may need new insurance products or financial services.

• Increasing Assets Under Management: The newfound liquidity can be invested, growing the advisor’s managed assets.

  
  

Real Client Example: Turning a Burden Into Opportunity

Consider the case of an 86-year-old man with a $100,000 universal life insurance policy. The policy had become a financial strain, requiring an $8,500 annual premium. The cash surrender value was zero, so the client planned to let the policy lapse.

Instead, his insurance agent suggested exploring a life insurance settlement. The result was a $13,000 lump sum—money the client had not expected—and an additional $700 per month in cash flow. This "found" money eased the client’s financial burden and improved his quality of life.

This example highlights that life insurance settlements are not just for large policies. Even smaller policies can provide meaningful financial benefits. The agent also earned a commission. Win for the client - win for the agent.

How Life Insurance Settlements Fit Into Financial Planning

Life insurance settlements can be integrated into a broader financial plan in several ways:

• Debt Management: The settlement proceeds can help pay down high-interest debt.

• Healthcare Costs: Extra funds can cover unexpected medical expenses or long-term care.

• Investment Opportunities: Clients can invest the settlement money to generate additional income.

• Estate Planning: Settlements can provide liquidity to cover estate taxes or other obligations.

  
  

Join Our Webinar to Learn More

If you want to explore how life insurance settlements can enhance your financial planning toolkit, join our upcoming webinar:

Date: Tuesday, January 13th

Time: 9:00 am Pacific Time

Click Here To Register

This 30-minute session will cover the basics, benefits, and practical steps to incorporate life insurance settlements into your client strategies.

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