Insurance Carrier Offers $2K in Policy Buyback But Senior Opts for $70K Life Settlement
Insurance professionals recognize that staying in touch with clients throughout the years is good business practice. Letting customers know they continue to matter long after the ink has dried on a life insurance contract can pay dividends later on for both the client and the agent.
Such was the case involving a recent life settlement transaction that we brokered for a 77 year old client at the recommendation of his agent. At the conclusion of the transaction, both the client and the agent walked away with what they considered a stunning outcome.
Carrier offers $2K for $1M policy with no CSV
To ease the demand on their cash reserves required by regulators for policies that have been sold, some carriers have recently begun buying back policies from insureds who no longer want the coverage. This cash incentive primarily benefits the carrier because when a policy is surrendered back to the carrier, the company is no longer responsible for paying a death claim. As a result, the carrier would be relieved of the cash reserve requirements tied to that policy.
The policy owner involved in this recent life settlement transaction had purchased the policy from his agent more than 13 years ago to provide income protection for his beneficiaries. But as time went on, the family’s circumstances changed and the need for the policy became obsolete. With annual premiums of $45K and no CSV, the insured felt financially burdened and no longer wanted to maintain the policy.
During the agent’s regular follow-up calls with the insured, the agent learned that the carrier had approached the policy owner with a buyback offer of $2,000. While the client’s initial reaction to the carrier’s offer was somewhat favorable, he wanted to get his trusted agent’s insight as to whether accepting the offer was in his “best interests.”
After discussing all the options with his client, it became clear to the agent and his client that selling the policy would result in a cash windfall far beyond the $2K offered by the carrier.
Asset Life Settlement brokered policy for $70K
During the course of his discussions with the client, the insurance agent contacted us to request a pre-qualification and pre-pricing analysis. While the insured’s age and good health put him on the borderline as it relates to most funders’ life expectancy requirements, we remained confident we could negotiate a substantial offer that went far beyond the carrier’s $2K buyback offer.
After sending the case out to market, we received two offers: The lowest offer was $30,000 (gross offer) and the highest offer was $100,000 (gross offer). Once commissions were paid, the client was thrilled to receive a cash payment of $70,000.
Staying in touch with older clients cannot be understated. From receiving new client referrals to the potential for selling new products, the value of maintaining close contact with your book of business is your lifeline to a successful practice.
In this case, the writing agent had built a trusted relationship with the client over the years, so when the question of whether to accept the carrier’s offer came up, the client relied on the agent’s guidance. Although the client did not have much knowledge about life settlements, he was receptive to hearing what the agent had to say about the efficacy of the transaction.
If you have clients who are feeling the pinch of maintaining life insurance policies they no longer want or need, it may be time to educate them about the secondary market. We will be happy to provide you with an educational FAQ (customized with your contact information) entitled “Facts All Seniors Should Know About Life Settlements.”
To receive your customized FAQ, or to pre-qualify your client’s case, call us at 1-855-768-9085.