Knowing what to look for and a desire to do the right thing goes a long way.
Preferred to fund different strategy for Trust after death of husband on 2nd to die policy
Divorce - rather than maintaining policy, settle and split proceeds
Change in beneficiaries obviated need for death benefit
Preferred liquidity of a sale to SV of a policy that owner no longer wanted to maintain
Unpalatable increase in premiums, policy no longer "worth it"
Opportunistic windfall, borne of health diagnosis and unwanted policy (term conversion)
Illiquid trust that owner could not/would not fund more
Adjusting large life insurance portfolio & prefer proceeds of sale to SV
Charitable Trust that donor no longer wished to fund/still healthy & lived much longer than anticipated
Corporate-Owned Key Man on departed CEO; policy obviously no longer necessary, but of value
Buy/Sell policy after sale of business of no value to insured/owner's estate
Proceeds to fund repayment of poorly performing premium finance loan to avoid collateral call
Key Man policy on owner after sale of business with subsequent health diagnosis that created value in policy
With growth of other assets in the estate, owners simply no longer wanted policy for beneficiaries
Term conversion opportunity for windfall
While certainly episodic, the opportunity to monetize an unwanted or surplus life insurance policy is more frequent - and of greater value - than most wealth advisors and life insurance producers are aware.
Most basically, just knowing to respond to a client's inquiry about an interest in a life settlement and the variables of a policy likely to have value to investors will ensure that you can at least be responsive to the opportunities borne of a client knowing to ask - and to do so in the most transparent, effective, and lowest cost way. But, given 10% awareness among policy owners of life settlements, you'll likely miss the other 90%.
So, while we'd be humbled to assist you with the 10%, we'd love to work with you to ensure that the other 90% don't unwittingly forfeit a policy that might garner significantly greater proceeds in a sale.
UL/VUL/Term
Policy Types
Any permanent, cash value - or convertible into cash value - policy can work, depending on other factors (Whole Life policies rarely work)
<72
If less than healthy
This is a function of duration demand in the market, the longest of which is about 16 years (life expectancy)
>72
If healthy
For women, add two years and for joint policies on which both are alive, add another two years before a policy is likely to work
$500K - $100M
Policy Size
Although we can help with smaller policies, there is little market demand, given the underwriting and admin costs relative to potential return
Understand what clients own and why...
You are uniquely positioned to assess the utility of a life insurance policy and which options – maintain, change, forfeit, settle – should be considered
Knowing what to look for - even just about the existence of policies, life events and milestones in your clients’ lives, or estate changes that may impact the utility of a policy - and applying basic processes to regularly engage those clients about them as part of the broader financial planning process, you can ensure that clients 1) maintain (or change, to maximize the utility) only those policies that contribute to broader objectives and/or responsibly explore a change in coverage to a more relevant product and, 2) in those instances that maintaining those policies no longer makes sense, consider a sale with an understanding that it might actually have value for your client.
GETTING STARTED
If you come across a client who expresses an interest and exploring the option to sell a policy that they no longer want or need, or you find them in or more programmatic and strategic approach to analyzing your clients' life insurance, it's only a few questions to figure out whether assessing its potential value as a settlement might make sense.
And then a straight forward process to initiate engaging the market.
Filter for Interest and Eligibiity
Potential value of a settlement to client?
Has your client inquired about options for a policy? Have you assessed or has your client indicated that a policy is no longer of sufficient utility to justify maintaining it (and would be interested in selling) or might the owner simply prefer the liquidity that a settlement may generate?
Relevant age or health?
Is the insured >72 or, if younger, less than standard health for his/her age?
Relevant product?
Is the policy a UL product (any variant) or a term policy that is convertible into a UL product?
Assess Likely Value
Get recent in-force illustration
Request from the carrier and submit to us an in-force illustration (level minimum funding to age 100+) - we can assist, if you do not have one.
We produce a valuation report
We review the illustration and produce a range of values at various impairment levels and discount rates that we expect it would receive in the market.
Is that range of values compelling to your client?
If we assess that a policy likely has value to the market, 80% of auctions are successful, producing a value in that range, often a winning bid higher than what we forecast.
Prepare for Auction
HIPAA Release
We will send you or your client a DocuSign HIPAA release form that permits the buyers to review your clients' medical records and to share those records with 3rd parties (e.g., life expectancy report companies.
Two years of medical records
If the insured is of standard health, records from the primary physician are typically sufficient. If the insured is of impaired health, we will likely need recent records from any specialists who the insureds sees.
A copy of the policy and premium history (if GUL/NLG)
If Trust owned, a copy of the Trust
Recent Engagements
Illiquid Trust
$9,000,000 GUL
87 f impaired health
Grantor of Trust preferred liquidity of a settlement to the fund other strategy
$5,900,000 GUL
91 f healthy
Buy/Sell after sale of business by owner who had sold the business, didn’t need policy
$1,500,000 UL (term conversion)
67 m cancer
Corporate-Owned Key Man on departed CEO
$51,000,000 GUL (corp. seller)
74 m moderately imparied
Adjusting large life insurance portfolio/liquidity preference
$9,800,000 GUL
Healthy 91m/91 f
Charitable Trust that donor no longer wished to maintain
$5,300,000 GUL
83 f healthy
Remaining insured/owner on 2nd to die policy simply no longer wanted/needed the policy
$1,500,000 GUL
74 m healthy
Owner wanted to get out of badly performing premium finance loan to avoid collateral call on loan
$40,000,000 GUL
Healthy 75/75 m & f
