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Case Studies |
Articles
Case Studies
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Policy
Type |
Age |
Sex |
Face
Value |
Cash
Surrender |
Life
Settlement |
|
Term
Life |
71 |
Female |
$250,000 |
$0 |
$35,000
|
Carla's Term Life policy was approaching conversion.
At 71, she had extenuating health issues, high
medical bills and could no afford her Life insurance
policy premiums. She obtained a Life Settlement,
which paid her $35,000. With the proceeds she was
able to re-coup the money she had paid into the
policy and pay off a portion of her medical bills.
|
|
Survivorship |
82/81 |
Male/Female |
$1,500,000 |
$264,000 |
$398,000 |
This
couple had a Joint Survivorship policy. Though both
individuals were in reasonably good health, they
were able to obtain a Life Settlement in the amount
of $398,000. Due to their good health circumstances,
they were then able to purchase another Life
Insurance policy at a significantly lower premium.
|
|
Universal |
73 |
Male |
$350,000 |
$1507 |
$60,000 |
Jack
had Universal Life policy that was 6 years old.
After suffering a heart attack, his need for Life
Insurance was outweighed by a greater need for Long
Term Care insurance. He was able to obtain a Life
Settlement in the amount of $60,000 and put the
funds towards a LTC policy.
|
|
Key-Man |
69 |
Male |
$2,000,000 |
$271,000 |
$473,000 |
|
A
company owned a Key-Man insurance policy on an
executive who was retired. The annual premium was
exorbitant and the company no longer wished pay.
They accepted a Life Settlement in the amount of
$473,000, which was $202,000 more than the policy's
cash surrender value. |
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Life Insurers Face
the Future, Grudgingly
By: Holman W. Jenkins Jr.
The
Wall Street Journal, 9 August 2006
Senior
Life Insurance Settlements: Education is key
By Jim Wolf, AIM
Life Settlements
From the Chicago Tribune -
Market exists for selling cash-value
insurance policies
By Matthew Lubanko,
Your Money columnist
Posted May 1, 2005
Q. I am 74 years old. I have a
cash-value life insurance policy with a face value of
$300,000. Because my wife and I have diligently saved for
our retirement, we don't feel we need the life insurance
coverage anymore. We have asked our agent to convert the
policy to cash, but the so-called surrender value is about
$23,000. Is there another channel through which we can
convert this policy to cash without taking a massive
financial loss on the money we have already invested in the
policy?
-- H.G., Orlando
A. Thanks to people in circumstances
similar to yours, a "life settlements" market has emerged
over the last 10 years. The basic function of this market is
quite simple: brokers and so-called providers find matching
buyers for the sellers of cash-value life insurance
policies. This secondary market for life insurance policies
is governed by the laws, or absence of regulations, in
individual states. Its value to you, the policy seller,
often depends on your age, the face value of the policy you
wish to sell, and the level of competition in the state
where you live.
When the secondary market works efficiently, the following
occurs: A provider agrees to buy your policy. The provider
might pay you three times the surrender value the
policy-writing insurer would pay for that same life
insurance contract. The provider then bundles your policy
with hundreds of other life insurance policies and resells
it to institutional investors on a secondary market.
"Institutions typically insist on at least 1,000 lives
[individual policies] before they'll consider investing [in
a bundle]," said Sean McNealy, co-president of Advanced
Settlements Inc..
But should you sell your policy?
That depends on many factors, including: How badly you need
the cash; how you plan to use the cash; how much a buyer
would agree to pay for your policy; and, most important of
all, whether the policy is potentially more valuable if it
stays in force.
Example: The $50,000 to $60,000 you might receive for your
$300,000 life insurance policy might be a steal if you live
for 20 more years or a major strategic error if you die
within two years. How your decision to sell the policy pans
out often depends on factors you cannot foresee or control.
"We often recommend that clients work in close consultation
with an accountant or estate-planning lawyer. Selling a
policy is never a cut-and-dried decision," said Dan Ohman,
vice president of Welcome Funds Inc..
Here are a couple of points would-be policy sellers should
consider.
Some of the cash you receive from the sale of your life
insurance policy could be taxable, if the settlement exceeds
the value of the premiums you have paid over the years.
Securing a life settlement is hardly simple. The process --
from basic planning to a policyholder's physical to
determine future life expectancy -- often takes six to eight
weeks.
We are here to answer your Life
Settlements questions
1-888-441-8881
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