Life Insurance Settlements
to navigate
BestOfferGuarantee™
Transaction Process
Guidelines
Tax Implications
Application & Forms
Institutions
Case Studies
Return to Main page
use
Login to DataExchange™
Ideal candidates for life insurance settlements are high net worth clients whose insurability has changed since the time the policy was issued. In addition, a decision to either lapse or surrender the policy is under consideration. A life insurance policy becomes unwanted or unneeded due to any number of situations. A client may need new insurance, an annuity, or long term care. They may have outlived their beneficiaries, sold a business, gone bankrupt, or experienced a divorce. A retirement or a termination may have resulted in the unwinding of a split dollar plan or the timed lapsing of either key employee or buy-sell coverage. The liquidity or size of their estate may have changed. Policy premiums may have become unaffordable. Perhaps the insurance is timed to lapse with a terminating trust. For whatever the reason, the original purpose of the life insurance may have changed. When that happens, a life settlement in the secondary life insurance market allows the policyholder to recover the true value of their insurance asset.'
Login to secure site
The secondary market for life insurance exists to provide policyholders the fair market value for their life insurance asset. For qualified candidates, a policy can be sold to an institutional party for a cash amount in excess of the insurance company's cash surrender value. This transaction is called a life insurance settlement. A qualified candidate is a policyholder that has had a change of health since the policy was first issued. Consider the example of a policyholder that takes out a policy and is assessed as a 'standard risk'. In later years, the policyholder has a change of health, and instead of being a 'standard risk' the rated health has declined and is now a Table 6 or 8. The actuarial value of the policy has increased but this increase in value is not reflected by the insurance company, because insurance companies do not offer health-adjusted surrender values. Institutional funding sources, recognizing the opportunity presented by the disparity between this asset's value and the incumbent's offer have proceeded to make available to policyholders life insurance settlements that reflect the true value of their policies. On average, the institution will offer over 400% more than the insurance company's guaranteed surrender value. Institutions entering into this life insurance settlement transaction are motivated by the desire to receive a 9 to 12 percent return by diversifying into a non-correlated asset class (i.e., an investment that does not follow the price movements of either bonds or equities). Institutional interest in this new asset class is increasing both domestically and internationally.
Life Insurance Settlements : Candidates
Life Insurance Settlements : Introduction
