Life Insurance Settlements
The “settlement” industry is a market where a life insurance policy owner (with the cooperation of the insured) can sell their life insurance policy as opposed to letting the policy lapse or surrendering the policy. Institutional capital markets are buyers as they recognize building an attractive non-correlated asset portfolio has significant value and fits within their asset allocation strategies. Policy owners can take advantage and secure significant benefits from un-needed, un-wanted, and un-affordable life insurance policies.
Many factors are involved in determining if a policy should be sold, and what offer to expect. Actuarial life expectancy, insurance carrier due care (financial stability), insurance product types are some of them. We act as your advocate, review the policy, follow a strict process to determine life expectancy, package the submission and negotiate on your behalf in the capital markets.
Expectation management is a key in the process as different institutional buyers will offer sometimes greatly different amounts for a particular policy.
Example: We had a client (who passed) who had a $5,000,000 term insurance contract that was coming out of its’ guaranteed pricing period. After this period, the cost of the insurance would increase over 500%. There was no need for the insurance and the insurance policy could still be converted to some form of permanent insurance (will stay in place through the client’s age 100). At our suggestion, we developed a submission allowing us to negotiate with several players in the capital markets. Additionally, during the past several years, unfortunately, the client was diagnosed with terminal cancer. Through our market negotiation, we were able to obtain an offer for $3,000,000 for the client and his family. This was “found” money which not only helped in the client’s treatment but provided security to his family. Review and communication are critical in managing relationships.