Orphaned Life Insurance Policies Can be a Life Settlement Goldmine
Here's a way to solve problems clients might not know that they have.
In recent times, the insurance sector has experienced a significant shift.
As many baby boomer agents begin to retire and with the downturns brought about by economic strains and the pandemic, a sizable void has been left in the market.
This situation begs the question: What happens to their existing policies/?
The answer: Many life insurance policies, perhaps hundreds of thousands, become orphans.
Understanding Orphaned Life Insurance Policies
An orphaned life insurance policy, sometimes called an unassigned policy, refers to any active life insurance policy that lacks an agent overseeing and servicing it.
This could be because the agent who initially wrote the policy may have retired, passed away, or simply lost touch with the policyholder.
Why Orphan Policies are a Goldmine
Potential for new business: Statistically, most people who buy life insurance will purchase multiple policies throughout their lives.
Thus, an orphan policyholder will likely be a candidate for future financial opportunities.
Ideal for life insurance settlements: Orphan policies tend to skew older, which aligns perfectly with life insurance settlements that are predominantly tailored for senior clients.
Reduced risk of lapsing: Neglected orphan policyholders are more prone to letting their policies lapse.
By reaching out to them, agents can decrease this risk and simultaneously present them with more suitable coverage options, including a free policy appraisal.
Strategies for Marketing to Orphan Policyholders
Identification and outreach: Agents should collaborate with their principals to pinpoint orphaned policies and then systematically market to them.
Initial efforts should focus on establishing contact and converting them from lost orphans into genuine prospects.
Assessing needs: Once contact is made, it’s vital to ascertain if the policyholder’s needs have changed since they first acquired the policy.
Agents should inquire if they are aware of new financial instruments that might be more suited to their current situation.
Segmentation: To optimize marketing efforts, one can segment orphan policies based on the policy type and the age of the policyholder.
For example, targeting seniors with universal life policies can be lucrative for agents looking to offer life settlements.
Policy appraisal: Before diving into the specifics of a new policy or settlement, policyholders might want to understand the worth of their existing policy.
Services like PolicyAppraisal.com can be instrumental in providing a secondary market valuation.
Educate about life settlements: Many orphan policyholders might be oblivious to the concept of a life insurance settlement.
By educating them, agents not only prevent potential lapses but can also turn a profit for the client, fostering trust, establishing a lasting relationship, and earning a few extra bucks in fees.
For individuals with orphaned life insurance policies, a comprehensive policy appraisal, followed by a life insurance settlement, can offer several advantages.
First, such a settlement provides immediate liquidity, granting the policyholder access to instant cash which can be used for various needs.
Furthermore, it eliminates the ongoing obligation of premium payments, alleviating the financial strain often associated with maintaining such policies.
Additionally, in the face of investment or portfolio losses, a life insurance settlement can serve as a means to recoup some of those financial setbacks.
Most importantly, it can act as an immediate support mechanism for heirs, ensuring their financial stability without waiting for the eventual payout of the policy upon the policyholder’s passing.
The Scope of the Opportunity
Estimates suggest that up to 40% of active insurance policies might be orphaned.
Even if we conservatively peg the figure at 10%, it translates to hundreds of millions of dollars in policies, all up for grabs.
By tapping into this segment, agents and advisors stand to benefit immensely from new business, settlements, and extra fees.
In conclusion, orphaned policies represent a vast, largely untouched reservoir of opportunity for proactive insurance agents and financial advisors.
By approaching this demographic with tact, understanding, and genuine intent to aid, agents can carve a profitable niche for themselves while providing valuable service to an underserved market.
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