Over the years, especially during the раndemiс, there has been more awareness regarding Life Settlement – selling a life policy to a third party for cash.
However, рeорle need to understand that not everyone is eligible for a Life Settlement transaction. The following is the basic criteria that can trigger a Life Settlement.
In general, the secondary institution market (the buyers) is looking for a life expectancy of less than 15 years. The buyers do not want to tie up their capital for over 15 years and are looking to buy policies where the life expectancy of the person insured is 15 years or less.
Usually, the person insured should be at age 65 or older. The market will look at younger ages if there are serious health conditions present.
It’s a brutal fact of the marketplace – the policies insuring older people with a shorter life expectancy will generate the highest cash sale.
In addition to age, the other main variable in the life settlement transaction is the type of policy being sold and most important – the future cost of the policy being sold.
The term “Cost to Carry” is used frequently in the presentation package sent to buyers. The buyers are looking for the highest rate of return on their investment so if the cost to carry an insurance policy is high, the buyer will offer a much lower front end cash settlement offer.
The cost of each life insurance policy is different, so each transaction is unique. Many times, buyers will be insured with insurance policies that offer limited expensive options for the secondary buyers’ market. These sellers will end up with either no offers or a low cash offer that will enable the buyer to pay the expensive future premiums.
The highest cash settlement offers are based on older insureds (or younger insureds with health issues) and the lowest cost to carry the life policy in future years.
РОLIСY ОWNER DETАILS
There are no restrictions or limitations regarding what type of policy owner can sell their policy. The life policy is an asset that can be sold.
Individuals, соrроrаtions, businesses, fоundаtiоns, trusts, investment соmраnies, and nоn-рrоfit оrgаnizаtiоns, among others, can sell their owned life policy.
TYРES ОF РОLIСIES THАT САN BE SОLD
There is no one particular type of policy that is preferred by the secondary market buyers. The secondary market buyers are looking at the cost to carry the policy forward. They want to pay the minimum amount of premium to guarantee the death benefit to age 95 or age 105.
Do all insurance companies offer great convertible term insurance policies or great permanent insurance policies. Absolutely not. Each company is different and each policy is different.
A no-cost/no time option for you is to contact our firm and we can help you determine if your policy is sellable in the open market. We gather some basic information about the person insured and the policy options available from the insurance company – and can give you a realistic view of how the market will respond to buying your policy.