What is a Life Insurance Settlement?
- A life insurance settlement is the sale of an existing life insurance policy on the secondary market to a third party for fair market value.
- The owner sells the policy in exchange for a lump sum settlement. This can be higher than cash surrender value.*
- The third party institutional investor becomes the owner of the policy. It makes premium payments, and collects the death benefit at the insured’s death.
- With institutional investors, policies are owned in large blind trusts with other policies. This can help to assure client confidentiality.
Why Would I Sell
My Life Insurance Policy?
Retirement Income
Funds are required to focus on personal needs such as retirement, long-term care insurance, or family emergencies.
Change of Business
Changes are made that result in insurance no longer being needed. Term policy is nearing the end of a term period. You can convert to a permanent product and receive, through a life settlement, proceeds for an asset that will terminate if not converted.
Sale of Business
Sale of a business, insurance is no longer needed and you would like to sell the policy for a lump sum cash payment.
Increased COI
Policies held within a trust are no longer meeting the original trust plan objectives.
Characteristics of a Potential Life Settlement Candidate
- Insured’s age is 65 and older
- Life expectancy of 15 years or less
- Decline in health from original policy issue
- Life insurance policies with a net death benefit of $250,000 or more (no maximum)
- Policy type Universal Life (UL), Survivorship Universal Life, Variable Universal Life and Convertible Term, (Sometimes Whole Life)
- Owner can be an Individual, Trust, or Corporation
- Premium should be 5% of Death Benefit (or less) and Cash Surrender Value should be 20% of death benefit (or less)
Contact Us to speak with a financial professional about Life Settlement Services.
Life Settlement Success Stories
Joe Campbell*, a 74-year-old physician, lost a substantial portion of the wealth he had accumulated over his career and was unable to maintain the lifestyle that he and his wife had become accustomed to. Dr. Campbell had two term insurance policies with a total death benefit of $5 million.
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Mark Jones*, a 63-year-old corporate executive, was diagnosed with cancer. Fortunately, he and his wife, Susan, had accumulated a comfortable net worth so that Mark could take early retirement.
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Ted Bailey*, a 59-year-old entrepreneur, had fallen on hard times during the economic crisis. As a result, he was forced to file bankruptcy to discharge business loans for which he was personally responsible. Ted had a $1 million term policy which needed to be converted within the next several months. However, he could not afford to pay the premium for a permanent policy.
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Mary Snow*, an 89-year-old widow, has a sizable net worth, but it has diminished over the last several years. After meeting with her Financial Advisor, they determined that she needed additional liquidity to pay the premiums on her other policies held by the family trust. Mary wanted to assure that the inheritance planned for her family and charities would remain intact.
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James Green*, a 67-year-old business owner, was diagnosed with colon cancer. His business partner was his sister-in-law and there had been a contentious historical relationship. The need for cash outweighed the need for the future death benefit. James owned a $250,000 universal life policy that was originally obtained for income protection, which he no longer needed since he had retired from the business. The policy had a small loan on it and James no longer wanted to pay the premium and interest due on the loan. A life settlement to create additional capital to pay the premiums on a larger policy was recommended.
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Emily and her husband Charles (now deceased) purchased a $4 million universal life insurance policy in 1995 for estate planning purposes. In order for Emily to maintain the policy through her life expectancy, her planned premium would increase from $44,000 to $106,000. Emily couldn’t afford the increased premiums and no longer needed the policy for estate planning purposes.
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