How Do You Know Which Policies Deserve Attention?
Most financial advisors understand they should review life insurance periodically. But with hundreds of clients and limited time, the real challenge isn't knowing that policies should be reviewed — it's knowing which ones deserve immediate attention.
Not every policy is a candidate for the secondary market. But certain warning signs — observable in premium notices, client conversations, health updates, and estate plan changes — reliably indicate that a policy may be worth far more than its cash surrender value.
The following 7 signs serve as early warning indicators. If even one applies to a client's policy, it warrants a closer look. If multiple signs are present, action is urgent — because every month of delay risks a lapse, a surrender at pennies on the dollar, or a missed opportunity that cannot be recovered.
Use this checklist in your next client review, your next team meeting, or your next book-of-business audit. The life settlement calculator can give you a preliminary estimate in under 60 seconds.
The 7 Warning Signs
Each of these signs represents a scenario where the client's policy may have significant untapped value. Look for them in your practice — and act on them when you find them.
Premiums Have Increased Dramatically
Universal life policies — particularly those issued in the 1990s and early 2000s — often carried aggressive illustrations that assumed high interest crediting rates. When those rates dropped, the cost of insurance (COI) charges began consuming the policy's cash value at an accelerating pace. The result? Premium notices that shock the policyholder.
Example: A client originally paid $8,000 per year to maintain a $1 million universal life policy. After 15 years of low interest rates and rising COI charges, the annual cost has ballooned to $18,000 — and the in-force illustration projects a lapse within 4 years even at the higher premium.
What to do: Before the client surrenders or lets the policy collapse, request a market valuation. Policies with rising costs and projected lapse dates are precisely the type institutional buyers find attractive — because their underwriters assess the policy's economics differently than the carrier's illustration engine.
The Original Purpose No Longer Exists
Life insurance is always purchased for a reason: replace income, protect a business partner, fund a buy-sell agreement, or create estate tax liquidity. But life circumstances change. Children grow up and become financially independent. Mortgages get paid off. Businesses are sold. And estate tax laws shift dramatically.
Example: A couple purchased a $3 million survivorship (second-to-die) policy in 2005 specifically to cover anticipated federal estate taxes. After the 2017 Tax Cuts and Jobs Act more than doubled the estate tax exemption, their estate is no longer taxable. The policy serves no planning purpose — but they're still paying $22,000 per year in premiums.
What to do: When the original purpose evaporates, the policy becomes a financial asset to be evaluated on its merits. Explore whether the secondary market values the policy higher than the carrier's surrender offer. In many cases, the market value is 4 to 8 times the cash surrender value.
The Insured's Health Has Declined
This is counterintuitive for many advisors: declining health increases the market value of a life insurance policy. From the perspective of a secondary market buyer, a shorter life expectancy means a shorter premium-paying period and a faster return on investment. Health conditions that make the insured feel the policy is less useful to keep actually make it far more valuable to sell.
Example: A 72-year-old client is diagnosed with early-stage Parkinson's disease. He holds a $500,000 whole life policy that he'd been considering surrendering for its $45,000 cash value. After a formal market valuation, multiple institutional buyers compete for the policy — the winning bid: $185,000.
What to do: Health changes create urgency. If a client has experienced new diagnoses, multiple hospitalizations, significant weight loss, use of home health aides, or other markers of declining health, get an appraisal before the client surrenders the policy for a fraction of its true worth.
The Policy Is About to Lapse
A policy lapse is the worst outcome for a policyholder. After years — sometimes decades — of premium payments, the death benefit disappears entirely, and the client receives nothing in return. Grace period notices are the insurance company's final warning before this happens.
Example: A 78-year-old widow holds a universal life policy with a $750,000 death benefit. Years of underfunding have depleted the cash value to zero. She receives a grace period notice giving her 60 days to pay $14,000 or lose the policy entirely. She assumes it's worthless. It's not. A life settlement broker markets the policy and secures a $127,000 offer.
What to do: Even zero-cash-value policies can have significant market value. In many cases, the buyer will pay the grace period premium to keep the policy in force during the transaction. Time is critical — act before the lapse date.
Client Is Entering Long-Term Care
Long-term care — whether assisted living, memory care, or skilled nursing — is extraordinarily expensive. The national average cost of a private nursing home room exceeds $100,000 per year. When a client enters long-term care, their life insurance policy shifts from a protection tool to a potential funding source.
Example: A 81-year-old client diagnosed with Alzheimer's is transitioning to a memory care facility. Her family is scrambling to fund care costs estimated at $9,500 per month. She holds a $400,000 term-converted policy with a cash surrender value of $18,000. Through a life settlement, the family receives $160,000 — enough to fund nearly two years of quality care.
What to do: A life settlement can transform an otherwise illiquid asset into immediate funds for care. This is one of the most impactful uses of the secondary market — and one that advisors and elder care attorneys should discuss proactively.
Estate Plan Has Changed
Estate plans evolve over time. Trusts are dissolved or restructured. Beneficiaries change. Tax strategies shift. When the planning architecture changes but the insurance stays the same, there's often a mismatch — and that mismatch represents trapped value.
Example: A client dissolved his Irrevocable Life Insurance Trust (ILIT) two years ago during an estate simplification. He now personally owns a $2 million survivorship policy that no longer serves any estate tax purpose. The annual premiums of $28,000 are an unnecessary drag on retirement income.
What to do: Review the policy within the context of the new estate strategy. If the coverage no longer serves a planning function, determine its market value before defaulting to surrender. Proceeds can be redirected toward charitable giving, annuities, or simply added to the investment portfolio.
A Policy Replacement Is Being Proposed
When a carrier or competing agent proposes replacing an existing policy — often via a 1035 exchange — the assumption is that the old policy's value equals its cash surrender value. That assumption is often wrong. The existing policy may have substantial secondary market value that a 1035 exchange would forfeit.
Example: A carrier proposes replacing a client's existing $1.5 million universal life policy (cash value: $85,000) with a new guaranteed UL product via 1035 exchange. Before proceeding, the advisor requests an independent market valuation. Result: the existing policy is worth $310,000 on the secondary market — nearly four times what the exchange would capture.
What to do: Always determine the market value of the existing policy before approving any exchange or replacement. As a fiduciary best practice, no policy should be terminated without first understanding what a third-party buyer would pay for it.
The Quick Eligibility Check
You don't need to run a full analysis on every policy in your book. A simple 30-second screen can identify which ones warrant a deeper look. If the policy meets all three of these criteria, it is likely eligible for a secondary market transaction:
Age 65+
The insured is 65 years old or older
$100K+ Face Value
The death benefit is at least $100,000
Health Change
Any decline in health since the policy was issued
Pro tip: Even if a policy doesn't meet all three criteria, the presence of any of the 7 warning signs above still justifies a conversation. Policies with face values as low as $100,000 and insureds as young as 65 can qualify — particularly when health has declined significantly.
What Happens After You Identify a Candidate
Once you've identified a policy that shows one or more warning signs, the process from identification to closing follows a straightforward path:
Preliminary Valuation
Submit basic policy details for a complimentary market estimate. No paperwork, no obligation.
Formal Application
If the estimate warrants proceeding, a brief application authorizes the broker to order medical records and policy illustrations.
Underwriting & Bidding
Licensed institutional buyers review the case and submit competitive bids. The broker negotiates on the client's behalf.
Offer Presentation
All offers are presented to you and your client transparently. The client decides whether to accept, negotiate, or decline.
Closing & Payment
If accepted, ownership transfers and a lump-sum payment is disbursed — typically within 60 to 120 days from application.
Throughout this process, you remain the client's primary advisor. Accelerated Life Solutions handles the specialized work — medical records, buyer negotiations, compliance — while keeping you informed at every stage.
Your Client's Policy Shows a Warning Sign?
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Start Free ValuationFrequently Asked Questions
How do I know if my client's policy qualifies for a life settlement?
The general eligibility criteria are: insured is age 65 or older, policy has a face value of $100,000 or more, and the insured has experienced some health change since the policy was issued. If any of the 7 signs in this article apply, it is worth requesting a complimentary market valuation.
Can a policy with zero cash value still be sold?
Yes. Cash surrender value and market value are entirely different. A universal life policy with zero cash value but a substantial death benefit may still be worth $100,000 or more on the secondary market — especially if the insured's health has declined.
What happens if my client's policy is about to lapse?
Time is critical but not necessarily too late. Many life settlement transactions close within 60 to 120 days. In some cases, buyers will advance premium payments to keep the policy active during the transaction. Contact a licensed broker immediately if a lapse notice has been received.
Does selling a life insurance policy affect the advisor-client relationship?
When done properly, a life settlement strengthens the relationship. You are helping the client monetize an otherwise worthless or burdensome asset. Accelerated Life Solutions follows an advisor-first model that keeps you as the primary point of contact throughout the process.
Is there any cost to get a policy appraised for market value?
No. Accelerated Life Solutions provides complimentary policy reviews and market valuations. There is no obligation to proceed if the client decides to keep the policy or explore other options.