Friday, June 24, 2016

Settling for Life

We've written before about viaticals, which are generally used by folks with end-of-life financial needs. But there's another, related strategy called life settlements:

"The insured had a $300,000 term policy that was also at that end of the level premium paying period and conversion period. When he called his agent to drop the policy because he no longer needed the coverage, the agent said, “Before you do, let’s see if there could be value in the secondary market.”

That is, the client had no particular health issues, but no longer needed the plan. Since life insurance is property, it can generally be sold. In this case, the client saved the annual premium and picked up an easy $5,000.

Which sounds great, and far be it from me to pooh-pooh anyone coming into a windfall. But I also have some major reservations about mentioning this "secondary market." It's not that I have any particular ethical qualms; after all, it's my client's policy, so why should I care? It just feels ... weird to bring this up.

So I reached out to some colleagues for their thoughts; FoIB Brian D immediately pegged it for me:

"I also fear how it would be received. Would it poison the well right before finalizing a sale."

Exactly. Now, perhaps this makes sense after the application has been approved, as a way to help the client pick up some extra cash now that their new plan is in place. And to be fair, this may well be what the folks who wrote that article do, as well, but it's just not explicitly noted.

And full disclosure: here in Ohio, agents are allowed to help make, and receive compensation for, these arrangements.

Something to consider going forward.
blog comments powered by Disqus