Know your Fiduciary Responsibility and Life Settlements
1 month ago

Know your Fiduciary Responsibility and Life Settlements

Many Americans are taking a much closer look at their retirement plans due to the potential for a recession. Advisors should play an active role in offering valuable guidance during these uncertain times. Current retirees are especially vulnerable to a downturn, as many live on a fixed income that isn't always enough due to recent price increases.

While life settlements have been around for a long time, they remain an under-used source of funds for eligible seniors. A few common misconceptions contribute to this problem, such as concerns that the life settlement industry is unregulated or that life settlements are only available for people with terminal illnesses – and that is not true.  The life settlement industry is highly regulated in most US states. Financial professionals should be required to obtain a policy appraisal and discuss selling a life insurance policy for seniors or anyone needing additional income.

Reasons Why You Should Recommend Life Settlements

A good financial advisor is vital in providing stability for their clients, especially during economic uncertainty. Over $200 billion in life insurance is either surrendered or lapsed each year, as a life settlement can play a critical role in helping seniors receive much-needed funds in retirement. Below are a few main reasons advisors should recommend life settlements for seniors.

Increase in Life Settlement Regulations

The life settlement industry continues to evolve rapidly. It's now much more regulated, which provides a lot more transparency for each policyholder.  On the other hand, regulations are weak when addressing financial advisors' and insurance agents’ responsibility when discussing the value of a policy appraisal or a life settlement.  Some financial advisor firms and insurance carriers restrict their agents from discussing these options, which is shameful.

Currently, 43 states and Puerto Rico now regulate viatical and life settlements. Life settlement companies and providers must disclose all the details of each transaction. This information includes details such as how the proceeds of a life settlement could impact income taxes and eligibility for Medicaid for the policyholder.

Advisors can also use a policy appraisal to give clients an idea of how much they can earn from a life settlement, which is much more convenient than waiting months to receive an individual estimate. Access to this technology and increased regulations have made life settlements much more accessible. Financial advisors can provide their clients with valuable information in only a few minutes – if they are not blocked from doing so.

Fiduciary Responsibility

A life settlement can offer clients significant financial relief, which is why financial advisors have a fiduciary responsibility for discussing the benefits of a life settlement. In other words, an advisor must share this information if a client is eligible and could benefit from a life settlement.

For example, it's important for a policyholder considering lapsing or surrendering their life insurance to know that obtaining a life settlement provides more cash than a policy's cash surrender value. The same is true for clients needing money to cover unexpected costs, such as increased assisted living or healthcare costs. Inflation also significantly impacts rising expenses, as clients must know that their life insurance policy can often be a valuable liquid asset.

Opportunity for Everyone

Policy Appraisals and life settlements are often excellent options for you and your client. A life settlement can provide the insured with much-needed cash and give the advisor or agent extra referral fees. Once the sale is complete, a financial advisor should also guide how clients can use or reinvest these funds and earn more fees or commissions.

Life Settlements and Retirement

Policy appraisals and life settlements can help ease the pain of inflation for those in retirement or considering retiring soon. The inflation rate is causing a quarter of Americans to delay their retirement due to these rising costs, as financial advisors can help guide clients on the best path for handling these challenges. Ultimately, the increase in transparency and the more effective regulations in the industry make life settlements an attractive option for Americans considering retirement.

Get a Policy Appraisal

Knowledge is key.  Our proprietary appraisal process uses a mix of current industry pricing methodologies and 30-plus years of experience. We provide a fast and efficient way to identify the secondary market value of existing life insurance policies.  Call us today and request a policy appraisal and see what your client’s approach may be worth.

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