Financial advisors and insurance agents know their life insurance policies.
In some cases, these policies can be the most important asset in a client’s portfolio, ensuring that costly medical bills and other expenses are paid, and that family members have financial security in the future.
As always, there are things even the most seasoned advisors and agents may not know — especially when it comes to the topic of alternatives to life settlements or viatical settlements.
- Life Insurance Rider Options
Accelerated benefit riders allow policy holders who are ill to access funds during their lifetime. For those who qualify, these riders can be a low-cost option to access funds quickly. Another alternative to an all-cash life settlement is a retained-death-benefit sale—a hybrid transaction in which only some of the policy’s death benefit is sold. The insured receives a lump-sum payment and retains some of the death benefit; the buyer agrees to pay all future premiums.
- Assistance With Premium Payments
When cash-flow issues make coming up with premium payments problematic, there are options. The insured can choose to borrow funds from relatives, especially beneficiaries under the policy. Other sources of equity are a 401(k), pension plan or stock portfolio.
- Third-Party Lending Solutions
Perhaps the biggest blind spot for those considering a life settlement is the availability of third-party lending solutions—often more flexible and better-suited to an insured’s needs. In many loan transactions, the total amount received by the borrower and the borrower’s beneficiaries will ultimately be higher than the amount the borrower receives in a life settlement.
A third-party lending program allows qualified individuals to tap into a portion of their life insurance policy value (i.e. net death benefit), with no restrictions on how the advance can be used.
For more information, please read:
3 Alternatives to a Life Settlement | ThinkAdvisor