When I think of Independence Day (July 4th), I think of American resilience and ingenuity. Americans possess a unique mental toughness and determination to fight for worthy causes. Hollywood has just launched their 2nd movie, Independence Day Resurgence that celebrates American strength and our ability to stand together and survive through difficult times.
Independence Day also makes me think of my father. He instilled his four children with determination, a positive attitude, and work ethic that allows us to be independent and work with like-minded people. These are the same traits that I see in the attorneys, CPAs, trust officers, financial advisors, and insurance planners that we partner with everyday. These client-centric advisors are faced with the daunting task of trying to find new solutions to help their senior clients plan for the future and recover from events that have put their retirement security in jeopardy.
Our parents and senior clients are under siege from a combination of disruptive changes that caught them off-guard. They have a longer life expectancy than any previous generation and are concerned about running out of money or being able to maintain their standard of living in their retirement years.
Many seniors feel like they are in real danger of losing the independence they’ve worked so hard to secure. Those same seniors are probably totally unaware that their life insurance policy has a fair market value. That value, on average, is 8 times as much as the cash surrender value (CSV) for senior clients who qualify for a life settlement. All too often, seniors and policy holders surrender life insurance policies that are no longer needed, have become too expensive to maintain, or they just want to reallocate the premium payments to other assets.
You can create an independence day for your senior client who has been impacted by unexpected circumstances by making sure they appraise any life insurance policy they plan to lapse. Here are some examples of wealth created from life insurance policies that were going to be lapsed or surrendered:
- Male age 74, $500K universal life policy, CSV=$27K FMV = $93K
- Female age 82, $3M universal life policy, CSV=$48K FMV = $1.2M
- Male age 72, $1M convertible term policy, CSV=0 FMV = $128K
- Female age 87, $5M SUL, husband deceased, CSV=$104K FMV = $3.1M
These clients used the life settlement proceeds from the sale in many different ways (because the proceeds can indeed be used for any purpose). Some used them to pay medical bills and long-term care expenses. Others bought retirement annuities or other investments. One of them used the proceeds to provide college funds for grandchildren.
In all of these examples, the seniors received an injection of liquidity and a new sense of independence that was unexpected prior to their advisor suggesting an alternative to lapse or surrender.
If you would like to help create Independence Day for your senior clients, get an FMV appraisal of any life insurance policy they plan to exit, lapse, or surrender. By making this part of your standard practices you will also be able to differentiate yourself from other advisors and enhance your reputation.
To learn more about options available to your clients who plan to cancel a life insurance policy, visit the "Consumer Advisors" section of the LISA website.
About the Author
Jon B. Mendelsohn is CEO and Co-‐founder of the Ashar Group, LLC a nationally licensed life settlement brokerage firm dedicated to representing the seller and their advisory team in appraising and securing fair market value for their life insurance. Jon is recognized in the industry as a thought leader and tireless champion for transparency and life settlement best practices. Jon is a sought after speaker on the national stage and a valued consultant to professionals working with sophisticated clients in the planning process. Jon graduated from the University of Florida with two bachelor degrees and a master’s degree. Jon is a proud supporter of the company cause, The Crohn’ and Colitis Foundation of America. He and his family reside in Orlando, Florida.