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Personal Reasons For Reverse Life Insurance, Life Settlements and the Misinformation Game

Personal Reasons For Reverse Life Insurance, Life Settlements and the Misinformation Game

 

At times, the life settlement industry, or a reverse life insurance process, appears to be the victim of the childhood game “Telephone.”  One person quickly whispers a message to another, and so on, until the meaning and nuance is completely garbled.  Despite major positive shifts in recent years, many agents remain misinformed about life settlements, and recent survey results prove it.  Both secondary and primary research show that many agents still believe that life settlements are unregulated, only for the terminally ill and require specialized knowledge.  Many also believe the transactions to be nefarious and creepy.  An education gap exists which needs to be crossed for the benefit of both agents and their clients.

Do they require specialized knowledge?  Research found that 61 percent of agents and financial advisors said “yes,” but the answer is “no.”  While the industry wants anyone participating to be well informed, no specialized licenses or experience is required to assist a client with a life settlement.

Aren’t they only for the terminally ill? Research results show that more than 30 percent of agents believe that life settlements are only for terminally ill clients, yet the industry has been purchasing policies from healthy seniors for more than a decade.

Don’t Life settlements violate insurable interest stranger-owned regulations?  Again, nearly 30 percent of advisors surveyed believe all life settlements are part of the stranger-originated life insurance activities that hampered the industry 10 years ago. Government crackdowns put STOLI schemes out of business and some went to jail.

The reasons that clients might consider a life settlement have become more mainstream:

·       Unneeded or unwanted insurance, in danger of lapsing, has always been the sweet spot for the industry.

·       As more seniors reach retirement age with large policies and escalating premiums, the market potential improves. 

·       Life settlement companies have even figured out how to purchase expiring term policies.

 

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Stephen E. Terrell

Stephen E. Terrell is president of Life Guide Partners. He may be contacted at stephen@lifeguidepartners.com.