InsuranceNewsNet Magazine January 2011 : Page 27
TERM-TO-PERM TO FEATURE SETTLEMENT TITLE | LIFE was purchased for the protection of a spouse who is now deceased. There are many common scenarios in which a life settlement is beneficial to a client. Because term insurance is less expen-sive than permanent insurance, the poli-cyholder may be holding with the inten-tion of letting it lapse. It was purchased for a specific time frame, and they real-ize that the safety net is no longer needed once the term expires. What they don’t know is that the option exists to do a term to perm transaction. It frequently makes more sense than letting the policy lapse. If an insured has more than one term policy, it may be advisable to have them convert one policy for a settlement while keeping the other term policy to ensure long-term insurability and ben-eficiary protection. Here’s an actual example of how a term-to-perm transaction helped a term policyholder: A 72-year-old male with a $1 million, 20-year, convertible term policy was deter-mining his options. The term was about to end, and the policy would be worthless if he didn’t renew or convert it. The annual premiums to renew increased dramati-cally—from $5,900 per year to $59,000 per year—making renewing untenable. His agent suggested converting the pol-icy to permanent insurance and then per-forming a life settlement. The agent created a cost illustration that listed the expenses associated with the policy conversion, while the life set-tlement provider computed a potential settlement offer (contingent on the con-version). The insured fronted the conver-sion premium and the settlement com-pany purchased the newly converted pol-icy from the senior. After the initial pre-mium was paid, the transaction netted the policyholder more than $42,000. The agent turned a non-performing asset into a net gain for the client and earned a fee on the conversion and on the life settlement. In addition, his client hap-pily referred him to other prospects. Of note for this and some other cases was a condition in the policy that it couldn’t be converted after age 75. The value of term-to-perm reinforces the notion that life insurance is playing an increasing role in retirement plan-ning. Today, term insurance, as well as permanent insurance, can be sold within the life insurance settlement market-place. This further illustrates why it is important to keep all policies in force, even during tough economic times. The new retirement paradigm can be a chal-lenge for seniors, but term-to-perm and life settlements offer solid solutions. While term-to-perm may not be an option for every term policyholder, it is certainly worth investigating. It offers agents yet another opportunity to discuss long-term needs with their clients, and can lead to transactions that benefit all parties involved. Stephen E. Terrell is senior vice president of The Lifeline Program, a life settlement provider based in Atlanta, Ga. For more informa-tion, call 770-724-7300, visit www.thelifeline.com or follow him on Twitter @LifelineProgram. He may also be contacted directly at Stephen.Terrell@innfeedback.com. Advisors: Start selling to federal agencies and you’ll boost your monthly revenue anywhere from $5,000 to $10,000 or more each month! It’s never been easier to get the training you need to tap into this lucrative market than now. The Redhawk certification process is simple and can be completed in only 3 days! Join the only company that works top-down with the federal agencies and sets all of your federal appointments for you! Not to mention, you could eliminate your prospecting altogether and stop spending $5K to $7K putting on a public workshop by working with Redhawk’s surplus of Federal agencies nationwide that need help from advisors like you. Plus – Get the comprehensive initial and ongoing training you need to become an official financial services speaker in the Federal market! You’ll also enjoy benefits such as: • Client contact meetings/ materials organized for you • Exclusive “Door Opener” to start the process • Advisor Benefits: Group Health, Life, Disability, Vision Go to www.ReachFederalAgencies.com for a FREE webinar that will answer all of your questions on the lucrative Federal market! January 2011 InsuranceNewsNet Magazine 27
