August Benefits News and Posts

Life Settlements Provide Escape Hatch When You Need Cash

From Forbes.com / By Cameron Huddleston

Perhaps you’ve seen the ads with older adults looking happy because they just sold their life insurance policy for cash. You might have scratched your head and wondered, “Is this for real? Can you actually sell a life insurance policy?”

Yes, you can. Life insurance is a way to support your loved ones financially after you die, but what few people realize is that a life insurance policy also is considered property. That means it can be sold. You can do so through a transaction called a life settlement.

A life settlement can be a way to get cash for a life insurance policy you no longer need or can no longer afford. For older adults who are struggling to pay for health care costs or long-term care in retirement, it can be a much-needed lifeline.

Yet many people don’t even realize this option exists.

“Some people are selling their houses [to pay for care] when they have an insurance policy that’s worth as much as the equity in their house,” says Michael Freedman, CEO of life settlement company Lighthouse Life. “They just don’t know they can sell it.”

Before you jump on the idea of doing a life settlement, though, understand how the process works, whether you qualify and if selling your policy is even the right move.

What Is a Life Settlement?

A life settlement is the sale of a life insurance policy by the policy owner to a third party. The seller typically gets more than the cash surrender value of the policy but less than the amount of the death benefit. The third party continues to pay the policy’s premiums and then collects the death benefit when the insured dies.

Although a 1911 U.S. Supreme Court ruling established the precedent that life insurance is private property, it wasn’t until the 1980s during the AIDS epidemic that a market for transferring ownership of life insurance caught on. Terminally or chronically ill patients could sell their policies to a third party for cash in what was known as a viatical settlement.

Unfortunately, fraud was a problem during the viatical settlement industry’s early days, says Lucas Siegel CEO of Harbor Life Settlements and Suncrest Benefits. People would apply for life insurance policies before being tested for HIV then turn around and sell their policies after getting a diagnosis. “That obviously created some problems and put a damper on how life settlements looked to the public,” he says.

Since then, the life settlement industry has become heavily regulated. A majority of states require a two-year waiting period from the time a life insurance policy is issued to when it can be sold, according to the Life Insurance Settlement Association. Ten states have a five-year waiting period. Plus, most states provide substantial consumer protections and require life settlement providers and brokers to be licensed.

Who Qualifies for a Life Settlement?

Age and health of the insured person are the two key factors when it comes to selling a life insurance policy. Typically, you need to be old enough or sick enough for investors to be willing to take on the risk of buying your policy, Freedman says.

Investors don’t want to risk paying premiums on a policy for someone who could live for decades. That’s why investors prefer to buy policies from people with shorter life expectancies. “The shorter the life expectancy, the greater the value is to the investor,” Freedman says.

Typically, you must be 65 years or older to qualify. The average age of people who sell policies through life settlements is 75, Freedman says. You can be younger, but you must have a serious health issue. Freedman says many state statutes require policy owners to be terminally ill with a life expectancy of less than two years or chronically ill and unable to perform at least two “activities of daily living” such as bathing, eating, dressing or going to the bathroom on their own. This sort of sale is usually referred to as a viatical settlement rather than a life settlement.

Investors also are interested in the amount of the policy’s death benefit. For example, Siegel says his company requires a policy to have a death benefit of at least $50,000. Policies worth $500,000 or more are more likely to sell, he says.

Magna Life Settlements estimated that the average policy face value in life settlements was $1.24 million in 2018.

Reasons to Consider a Life Settlement

A life settlement can make sense if your need for cash is greater than your need for providing a life insurance payout to your current beneficiaries. Your kids might be grown and no longer count on support from you. You might have high medical costs associated with a terminal illness. Or you might need long-term care but don’t have another way to pay for it, such as a long-term care insurance policy.

Plus, if you can’t pay your life insurance bill, it can make sense to get market value for your policy by selling it rather than letting it lapse.

“The only one who wins by lapsing a policy is the life insurance company,” Siegel says. That’s because the insurer won’t have to pay out on a policy that you spent years paying to keep in force. So, before letting your policy lapse, find out what it would be worth if you sold it, Siegel says.

As mentioned, the amount you get through a life settlement will be more than the cash surrender value of your policy—if it’s a cash value life insurance policy. People typically get four to 11 times the cash surrender value of a policy, Freedman says. Plus, he says, several state statutes also require that the amount of a life settlement exceed a policy’s accelerated death benefit, which is a portion of the death benefit the insured can access while living if diagnosed with a terminal or chronic illness.

If you have a term life insurance policy, which never have cash value, the amount you’ll get by selling your policy will depend greatly on your health, Siegel says. The more health issues you have and the shorter your life expectancy, the more money you’ll get.

It’s possible to sell only a portion of your life insurance policy. That way your beneficiaries will still get some payout when you die, Siegel says. You won’t get as much from the sale of your policy, though, because you’re reducing the death benefit amount the investor will get. But when you retain some death benefit in a life settlement, you are given the option to take back ownership of the policy if the buyer no longer wants to continue paying premiums on their portion, Siegel says.

Types of Life Insurance Policies That Can Be Sold

You can sell either a term life policy or a permanent life policy. However, if you have a term life policy, investors prefer that the policy have an option to be converted to a permanent policy because they don’t want to risk having the insured outlive the length of the policy, Freedman says. Or the insured’s life expectancy must be shorter than the term of the policy to sell it, Siegel says.

An overwhelming majority of policies that are sold are universal life insurance policies. The premiums for universal life policies tend to be lower than premiums for whole life policies, which makes them appealing to investors, Siegel says. And because premium payments can be flexible, owners of these policies sometimes find themselves in situations where they didn’t pay enough in premiums early on and are forced to pay more over time to keep policies in force. As a result, some can’t afford their policies and are willing to sell them, Freedman says.

How to Sell a Life Insurance Policy

Most life settlements are handled through brokers. Brokers must be licensed and have a fiduciary duty to represent the policy owner. They will put a policy on the market in an “auction” and get bids from multiple buyers, says Siegel, whose company, Suncrest Benefits, is a life settlement broker. “Their goal is to get [policy owners] the maximum price possible,” he says.

Because brokers do the comparison shopping for you, they get a commission. Siegel says that his brokerage gets no more than 8% of the face amount of a policy or 30% of the life settlement payment, whichever is lower. The average commission his company gets is 22% of the amount of a life settlement payment.

Commissions can vary from broker to broker. Some can be as high as 50% of the price a policy sells for, Freedman says. So be sure to ask brokers what their commission is and whether they charge any other fees.

The other option for selling a policy is to work directly with licensed buyers, called providers. Lighthouse Life, for example, refers policy owners to providers. And you can find providers through the Life Insurance Settlement Association’s membership directory.

You can avoid paying a commission if you sell directly to a provider. However, you should shop around to get multiple offers from buyers that are licensed in the state where you live, Freedman says.

Whether you work with a broker or sell directly, you’ll need to fill out an application with information about your life insurance policy. You will have to provide consent to release your medical and prescription records for review so that an underwriter can assess your health and estimate your life expectancy. Then buyers can make offers on your policy based on your health and the value of the policy. It is possible that you don’t get any offers.

Questions to Ask Before Selling Your Policy

As with any major financial decision, you shouldn’t rush into selling a life insurance policy. Be sure to ask the life settlement broker or provider the following questions:

Are you licensed in my state? Most states require life settlement brokers and providers to be licensed. You can check with your state insurance commissioner to verify that a broker or provider is licensed.

What fees will I have to pay? Brokers charge commissions for selling your life insurance policy. Some also will require you to cover the cost of getting your medical records, Freedman says. So be sure to ask for a full disclosure of transaction costs.

Who is buying the policy? The life settlement market is dominated by large investment firms, Freedman says. However, there are individual investors and small groups that buy life insurance policies. These sales can be more risky, Freedman says.

What will happen to the policy once it’s sold? Some buyers will buy policies and then turn around and sell them for more to other investors, Siegel says. If your policy is being sold and resold, you might not know who will end up owning it—and you have to ask yourself if you’re comfortable with that.

How will your privacy be protected? Because you have to provide personal information for a life settlement, ask the broker or buyer whether the information you provide will be kept confidential. Ask who will have access to that information during the sales process. You also can check with your state insurance commissioner to see if your state has regulations to protect your privacy.

Pros and Cons of Life Settlements

Alternatives to Life Settlements

A life settlement can be a way to get cash you need for medical or long-term care costs, to cover costs in retirement, or to simply get the market value of an asset you own but no longer need. But it’s not the ideal option for everyone. There might be better alternatives for you than selling your life insurance policy.

Life settlement brokers and providers are required to tell you what your alternatives are to selling, Freedman says. Those alternatives can include:

Letting your policy lapse by no longer paying premiums
Surrendering your policy for its cash value, minus any surrender charge
Accessing your policy’s accelerated death benefit to get a portion of the death benefit amount if you’re diagnosed with a terminal illness
Borrowing from the cash value of the policy
Using the cash value or dividends from a permanent life insurance policy to cover premiums if you’re having trouble paying your insurance bill and want to keep your policy in force.
Converting a permanent life policy to a hybrid policy with a long-term care benefit. However, you must qualify health-wise for the new policy. So this likely won’t be an option if you’ve already been diagnosed with a chronic illness and are unable to perform activities of daily living.

Be aware that if you reach out to your insurance company to discuss your options for ending your policy, you might not even be informed about the life settlement option. Only six states require life insurance companies to notify policy owners of the alternatives to surrendering a policy or letting it lapse, according to the Life Insurance Settlement Association.

If you work with a financial planner, discuss whether a life settlement is appropriate for your situation.

Todd BellistriFebruary 16, 2021August Benefits

Why not start off this selling season leading into the holidays on the right foot? One way to do that is to finally give some thinking to smart marketing. We don’t need to be the ones to tell you it’s very competitive out there (but we will), what with tons of start ups and side hustles all over the landscape. By developing a legit marketing program you are giving yourself a true foot up on the competition. So read on, you’ll see that its not as daunting as you think and the upside is well worth it.

FROM FORBES / BY DOMINIQUE HARROCH

In today's digital landscape the right approach to small business marketing combines advanced technology, data-driven insights, and effective digital platforms. Here’s a comprehensive guide to small business marketing to companies navigate the current marketing trends and tools that can drive business success.

Key marketing tools for small businesses

Following is a summary of 11 key marketing tools that small and growing businesses should consider when leveraging owned, earned and paid media:

1. An optimized small business website

A high-performing website is crucial for marketing today. An optimized site increases your page rank on Google and other search engines, and in today's world, fewer than 1% of searches go to the second page of a search. Key elements of an effective small business site include:

Memorable domain name: Choose a name that reflects your business and is easy to recall.
User-friendly design: Ensure your site is visually appealing and intuitive. Sites should have a clear structure, intuitive navigation and information that is easy to access.
Search engine optimization (SEO): Implement SEO best practices to rank higher in search engine results.
Mobile optimization: Since over 55% of global web traffic comes from mobile devices, you’ll want to ensure your site is mobile-friendly.
Valuable content: Regularly update your site with engaging content like blogs and articles that address your audience's interests and needs.
Fast loading times: Optimize page speeds to improve user experience and SEO rankings.
Secure hosting: Use reputable hosting services to protect your site’s data and performance.

Additionally, integrating tools like Google Analytics (now called GA4) and Google Search Console (GSC) can provide valuable insights into your site's performance and user behavior.

2. Paid search engine marketing (SEM)

Paid search engine marketing, in which you pay if a keyword is clicked on that drives traffic to your website, remains a powerful tool for driving targeted traffic. Platforms like Google Ads and Bing Ads allow you to:

Bid on keywords: Use tools like Google keyword planner to select high-value keywords relevant to your business.
Control costs: Set daily and monthly budgets, and adjust bids based on performance.
Analyze performance: Track key metrics to assess and refine your campaigns.

3. Paid listings and display ads

Paid listings on platforms like Yelp, Facebook, and Pinterest can boost visibility. Use Google’s Display Network to target ads based on user interests and behavior. This approach allows you to:

Choose ad formats: Use banners, text ads, or video ads to capture attention.
Track return on investment (ROI): Monitor clicks and conversions to measure effectiveness. Track your costs, record and monitor revenue, and record all expenses. Make sure to measure lead generation numbers, customer acquisition, and sales metrics as valuable insights into your marketing effectiveness.
Testing: By experimenting with different ad copy, targeting options, and formats, businesses can identify what resonates most with their audience, refine their strategies, and ultimately improve click-through rates and conversions. This can include A/B testing, target audience variations, ad copy variations, call-to-action (CTA) testing or visual elements where you test different images or videos to determine which visual elements attract more attention and engagement.

4. Content marketing

Content marketing remains a cornerstone of effective digital strategies. Key tactics include:

Blogging: Regularly post optimized content to drive organic traffic. Nine out of ten marketers use blogs as part of their content strategy.
Guest posting: Publish articles on popular platforms such as Medium and AllBusiness.com to enhance your reach and SEO. Strive to create “evergreen” articles, which are designed to remain relevant and valuable over a long period of time, regardless of current events or trends. Unlike timely articles that focus on current news or trends, evergreen content addresses topics that have enduring interest and utility.
Video content: In 2023, individuals spent an average of 17 hours a week watching videos online. Utilize platforms like YouTube and TikTok to engage your audience.
Content platforms: Leverage content recommendation platforms like Outbrain to expand your content’s reach.

5. Social media marketing

Social media is a powerful tool for engaging with your audience. Focus on platforms such as:

Facebook: Effective for broad audience reach and targeted ads.
Instagram: Ideal for visual content and influencer partnerships.
LinkedIn: Best for B2B marketing and professional networking.
TikTok: Useful for viral video content and younger demographics.

With over 5 billion global social media users and growing, effective social media marketing can significantly enhance your brand’s visibility and engagement. To be effective, you must regularly post interesting content to obtain and keep followers.

6. Influencer marketing

Influencer marketing involves collaborating with individuals who have a significant and engaged following on social media platforms like Facebook, TikTok and Instagram to promote products or services. These influencers, who can range from celebrities to niche content creators, leverage their credibility and relationship with their audience to drive brand awareness and influence purchasing decisions.

The impact of influencer marketing on broader marketing efforts can be profound, as it allows brands to tap into authentic, targeted communities that are often more receptive to recommendations from trusted (or at least known) voices.

This form of marketing can enhance brand credibility, expand reach, and generate higher engagement rates compared to traditional advertising. As consumers increasingly seek personalized and relatable content, influencer marketing has become a powerful tool for connecting with audiences in a meaningful way.

7. Online business directories

It’s important for business owners to list their companies in prominent and reputable business directories. Often these listings are free, but even if you must pay a small fee, it can be worth it.

The benefits include

Exposure to potential clients and customers.
Boosted SEO through backlinks.
Improved online presence and brand awareness.
Increased credibility for your business.
Low-cost or free marketing.

The following is a list of top business directories to consider listing your business:

AllBusiness.com
Better Business Bureau
Facebook Page
Google Business Profile
LinkedIn
Superpages
Bing Places for Business

8. Radio marketing

While less prominent today, radio can still be effective. Many people are in their cars during peak commute hours. To maximize radio advertising:

Targeted placement: Choose stations and time slots that align with your target audience.
Engaging content: Create memorable and concise ads.
Consider your market: Are you a B2C company (business to consumer) or B2B company (business to business)? Is your market local (like a neighborhood restaurant), national (such as selling payroll services), or international (such as selling unique clothing to multiple markets)?

The cost-effectiveness of radio compared to TV makes it a viable option for more localized campaigns.

9. Press releases

Press releases are valuable for announcing significant business updates. Ensure your release is:

Newsworthy: Focus on unique and timely information.
Well-structured: Include a strong headline, key details, and contact information.
Multimedia: Incorporate multimedia elements like images and videos to increase engagement.

10. Email marketing

Email marketing remains effective when executed correctly. Best practices include:

Segmenting: Personalize content based on customer preferences and behavior. Use data to segment your lists and target markets.
Offering engaging content: Provide valuable information, special offers, and updates.
Optimization: Use A/B testing to refine subject lines and content.
Using AI-driven tools: These can help automate and personalize email campaigns, improving engagement rates.

11. Direct mail marketing

Despite the digital age, direct mail still works for certain audiences. To optimize direct mail:

Use targeted lists: Use well-researched mailing lists to improve ROI.
Implement creative designs: Ensure your mail piece stands out and is easy to read.
Track mailings: Monitor responses and effectiveness.

More tips to enhance your marketing campaigns

Here are some additional tips to optimize your marketing campaigns:

Segment: Segment your target market to a specific audience. Segmentation can be done with respect to age, gender, income level, education, geography, purchase stage or brand loyalty, and more.
Business lists: Consider using high quality business lists such as Dun and Bradstreet, Experian Business, ZoomInfo or InfoUSA. These lists can be used in multiple channels as well, maximizing the value of the lists.
Track real time: Track your marketing campaigns in real-time to get immediate insights, make quick adjustments, and understand what is working or not.
Key metrics: Track the key metrics in your campaigns, such as click-through rate, engagement rate, conversion rate, sales, revenue, customer acquisition cost, market share, and churn rate.
Software and AI: Use software and artificial intelligence (AI) tools for social media management, content creation and testing of alternative ads.
Budget: Allocate your budget wisely. Assess the performance of different marketing channels and allocate your budget to the ones that deliver the highest ROI. Continuously review and adjust your spending to focus on the most effective strategies.
Keep current: Stay updated with trends. Keep up with the latest marketing trends and technologies. Experiment with new platforms, tools, or strategies to stay ahead of the competition and reach your audience in innovative ways. Keep up to date with experts by seeking articles from reputable business sources such as AllBusiness.com.
Promote across channels: Share earned media coverage on your website, social media platforms, and email newsletters. For instance, if a major publication writes about your product, feature this article prominently on your homepage or social media profiles.
Showcase social proof: Use earned media as a form of social proof by highlighting positive reviews, testimonials, or features from reputable sources. This can build credibility and trust with potential customers.
Strengthen relationships with media: Build and maintain good relationships with journalists and influencers. This can lead to more favorable coverage in the future and expand your media network.
Repurpose content: Convert mentions and reviews into additional content, such as blog posts, case studies, and infographics. For example, if your company was featured in a popular tech blog, you could create a detailed blog post about the experience and its impact.

Ready to enhance your small business marketing strategy?

Developing a comprehensive and modern small business marketing strategy requires leveraging a mix of traditional and digital techniques. By integrating artificial intelligence tools, optimizing SEO, utilizing effective SEM strategies, and harnessing the power of social media, you can create a dynamic and effective marketing approach. Start by experimenting with different strategies, tracking your results, and refining your approach based on performance data.