Why Sell Your Life Insurance Policy? – One Question, Two Answers

There are two possible answers to this question. Answer one is that the policyholder is looking to raise cash, and the second answer is that the life insurance policy is no longer needed.

To get cash

If a client has entered into the sales process with their only motivating factor being the desire to release cash from the sale, then it is the broker firm’s responsibility to ensure that the client is fully aware of the implications of the sale.

It is also likely that such clients will be the target of unscrupulous brokers, yes they are out just as they are in every industry, who will promise a high cash value, but neglect to tell them about their high fees and commission.

The client may be unaware that they could be exposing their family or home to unnecessary risk by forfeiting the benefits of the life insurance policy to a third party.

Ultimately it is the client’s decision whether they want to proceed or not with a sale but the broker has a duty of care to the client. The broker should establish if the need for cash could be addressed by other solutions, so a full financial analysis of the client should be carried out at the start of the process.

No longer need the policy

For people of a certain age it may be that they no longer need a life insurance plan or that they do not need one that has such a high face value.

Their situation in life may have changed and they no longer have a mortgage or they may no longer have financial dependents. They could be approaching retirement and they are looking to add to their pension pot, or they could be on a reduced income and therefore the premium payments are no longer affordable.

This list of reasons is almost endless but what they all have in common is that the client’s circumstances and financial needs have changed. All financial planning is about addressing the client’s needs and requirements and obtaining cash settlement from a life insurance sale is no different.

One of the main reasons that firms such as Fund Life Financial are noticing for the sale of policies is that a client’s health situation has changed. The funds released by the sale of the policy are then being put towards the costs involved in providing long term care solutions. This can sometimes involve the purchasing of expensive medication, making alterations to the home such as widening doors or paying to move into care facilities.

By understanding the client’s changing needs, the broker firm can deliver the advice that is most appropriate to their situation. They should conduct holistic financial planning that encompasses all of the client’s financial needs, both now and in future, as well making sure that they have the right protection and cover in place.

In conclusion, the advice to both the client and the broker is that careful consideration needs to be given, not just to what the client wants to do, but why they want to do it.