A large number of financial advisors have little or no knowledge about life settlements as an option for aging life insurance policies, says William Scott Page, president and CEO of The Lifeline Program, a life settlement firm.

A survey of 200 advisors showed 40 percent were either unfamiliar with life settlements or had only heard of them, but did not know any details. Only 18 percent of the respondents cited life settlements as a strategy to provide clients with money to use or to reinvest. Eleven percent of respondents had recommended a life settlement or helped a client sell a policy.

Many advisors also believe life settlement transactions should only be considered when the policy holder is terminally ill, Page says.

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. Selling a policy is an option to take rather than letting the policy lapse. The money can be used for long-term health care costs, invested, or used for any other purpose.

Advisors also can benefit from a client selling a life insurance policy because often the money is reinvested with the advisor, Page notes.

“We are still combating misconceptions about life settlements that first appeared more than 20 years ago,” says Stephen E. Terrell, executive vice president of The Lifeline Program.

The Lifeline Program recently unveiled a white paper on the subject, The Real Story About Life Settlements.