Win-Win Success Story: Elderly Client Sells Policy and Recoups 92% of Policy’s Cost Basis | Agent Earns $54,000 Comp Check

Life settlements have emerged as a powerful wealth preservation tool for financial advisors and other professionals who have a fiduciary obligation to serve the client’s best interests.

In many cases, selling an unwanted policy in the secondary market results in a far better outcome for the client than accepting a low cash surrender value, or allowing the policy to lapse. When the financial benefits of selling the unwanted policy outweigh all other courses of action, the professional advisor has the duty to inform the client of the option.

The actual life settlement success story summarized below illustrates how selling an unwanted policy resulted in a win-win for both the client and her advisor. The proceeds from the transaction exceeded the client’s expectations and enabled her to more than achieve her wealth preservation goals.

In addition, the advisor who facilitated the transaction was able to earn a substantial commission, with full disclosure and approval by the client. Click here to access a printable flyer of this extraordinary life settlement success story.

Case Profile
•   90-year-old female; 4-6 year life expectancy
•   $1.8M Standard UL Policy
•   $94K Premium; Escalating to $144K
•  $544K Cost Basis / Premiums Paid
•   CSV less than $5,000
•   20 Offers from interested buyers
•   $80K Lowest Offer
•   $512K Highest Offer (Accepted by Seller)
•   $54K Comp paid to Agent

Detailed Summary

The insured in this case is a 90-year-old female who was financially burdened by the annual premiums for a $1.8 million UL policy purchased 20 years ago.  She no longer needed the policy and her family’s goal was primarily to achieve premium relief.
Considering the insured’s 4-6 year life expectancy, the family sat down with their financial advisor to discuss their mother’s estate planning goals and review the best options for the policy. They explained to the advisor that they could no longer justify keeping the policy in force because the premiums were about to escalate from $94,000 to $144,000 a year.

Coincidentally, the financial advisor had recently read an article authored by a co-founder of Asset Life Settlements that was published by BrokerWorld Magazine. The article detailed an extraordinary life settlement success story involving a 91-year-old who was similarly burdened by excess life insurance coverage. The advisor was so impressed with the article because it illustrated how selling a $3 million policy for $1,515,000 helped the insured achieve a number of wealth preservation objectives.
The advisor shared the BrokerWorld article with the family and, after reading it, they decided the best course of action was to sell the $1.8 million policy. They unanimously agreed that Asset Life Settlements should be brought in to broker the transaction.

At the outset, the client’s advisor asked that we expedite the life settlement transaction so that the client could purchase an annuity prior to her 91st birthday using the proceeds from selling the policy. We immediately began the underwriting process and following that, we proceeded to negotiate with 20 potential buyers until the highest offer was received. Offers ranged from $80,000 to a high offer of $512,000, which the client accepted.

The timing for receipt of the life settlement payout was perfect in that the family needed to purchase a multiyear annuity prior to their mother’s 91st birthday.  The settlement check arrived two weeks prior to her birthday.

How Agents/Advisors Earn Comp

An insurance agent or a life-licensed financial advisor will typically serve as the quarterback for the client’s life settlement transaction. Their specific duties include the following:

  1. Works directly with the client to facilitate the application, underwriting, and bidding processes
  2. Helps pre-qualify the client for the life settlement based on age, health, etc.
  3. Facilitates the assembly and submission of medical records that are required to determine the client’s life expectancy.
  4. Establishes a working relationship with a life settlement broker who has the highest qualifications and credentials to negotiate the most favorable outcome for the client.
  5. Serves as the life settlement broker’s go-between with the client and other members of the advisory team to communicate the status of the life settlement broker’s efforts involving the competitive bidding process.
  6. Maintains frequent communication with the life settlement broker; informs the client and other members of the advisory team of the highest offer received; and provides a recommendation as to whether the highest offer is a sound one.
  7. Suggests options to the client in terms of how the proceeds from selling the policy could be used to address the client’s financial goals.

In terms of the amount of comp paid, standard industry practices as well as the providers who purchase the policies generally set the parameters for commissions earned. Maximum comp is typically 6% of policy face value, or 30% of gross offer, whichever is the lesser of the two. Once the total amount of commission is determined, the agent and the settlement broker agree on the percentage split which for the agent can range from 50% to 70%.

Key Take-Aways:

Growing numbers of seniors are discovering that selling an unwanted life insurance policy in the secondary market is a smart liquidation strategy for an asset that has become too burdensome to maintain. The cash proceeds from the transaction can be used for any purpose, including purchasing an annuity for a guaranteed income stream.

Life settlement brokers, such as Asset Life Settlements, have a fiduciary obligation to negotiate the highest possible offer for the client.

Insurance licensed advisors who facilitate life settlements for their clients have the opportunity to earn commission. In this specific case, the agent received a commission check for $54,000.  Commissions that are paid to the broker and the agent are fully disclosed to the client ahead of time.

Call us at 1-855-768-9085 to explore your client’s eligibility for a life settlement or to request a free policy appraisal.