New ways to increase your book of business are hard to come by these days -- and new annuity liquidity options can help you do just that.
Traditionally, it has been difficult to provide clients with flexible cash-out options once they have committed to an annuity. There is now a growing secondary market, however, for liquidating annuity payments.
Why would someone be interested in liquidating their annuity? There are as many reasons as there are clients. There may be estate planning reasons, an unforeseen immediate financial need that has arisen, or, most commonly, an inherited annuity stream.
Case #1: Inherited annuity benefit
Take the hypothetical situation of Eric Rogers. Eric received a letter from his uncle's insurance company giving him a choice of two death benefit options: receiving $1,900 a month for 60 months or a one-time cash payment of $78,991. To Eric, the annuity seemed like the better deal.
But by liquidating in the secondary market, there is a third option that would give Eric a cash payment of $91,102 -- $12,111 more than the insurance company offered.
Case #2: Unforeseen immediate cash need
Lisa Richards purchased an immediate fixed annuity five years ago. Three months ago, her agent contacted her with the secondary market cash value of her remaining payments. She did not decide to do anything at that time. Shortly thereafter, Lisa decided to start a business and needed $100,000. Lisa remembered that cash value and called her advisor. By liquidating her remaining annuity stream of 60 monthly payments of $2,200 through the secondary market, Lisa's agent was able to provide with the cash she needed.
Never surrender before checking the cash value
You owe it to your client before they surrender any annuity to check the market cash value. Many times, you can liquidate the annuity in the secondary market for thousands of dollars more in proceeds.
Types of annuities that can be purchased
The secondary market purchases fixed annuities, whether they're immediate or deferred. If it is a deferred annuity, it usually needs to be in payout. Not all annuities can be sold in the secondary market. For example, variable annuities cannot be sold.
Also, any annuity with a qualified tax status is not eligible.
Insurance agents and advisors who present this new annuity liquidity option can provide a valuable service that is in the best interest of their client. Many times, proceeds from liquidating an annuity can be put into other insurance products -- and now you have a new, loyal client.
Michele Hsu is senior vice president of Stone Street Capital LLC. She can be reached at 800-586-7786.
