Life insurance policy settlements are a viable strategy for advisor clients who lack long-term care insurance, according to a life settlement industry executive.
With a life settlement, an existing life insurance policy can be sold to a third party for more than the cash surrender value, but less than the death benefit, with the money put toward long-term care, said Scott Page, president and CEO of The Lifeline Program, a life settlement firm.
“The long-term care insurance market is unstable right now, so it is a good time to look at alternatives,” he says. Page spoke at a webinar Tuesday sponsored by The Society for Financial Service Professionals.
Seventy percent of people 65 and older will need long-term care, says Justin Pipon, senior account manger for The Lifeline Program. Moreover, nearly half of seniors who have life insurance let the policies lapse because they think they no longer need them or the premiums become too costly.
“Increase your knowledge of the secondary market and then review your clients overall financial needs,” he says. “Life insurance should be looked at as an asset. It can be bought and sold like any asset.”
Arranging the sale of an insurance policy takes about two months, so Page advises not waiting until the last minute when the policy is about to lapse to consider selling it. Have the discussion early, he advises.
Taking such action increases the assets under management for the advisor and makes the advisor an advocate for the client, Pipon says.