The question was: Generally speaking, will a $1 million 20-year level term policy attract a better settlement offer if it has a conversion option for the full term period versus no conversion option or a very limited conversion option?
The answer is: In general, a $1 million 20-year level term policy with a conversion option is a more viable life settlement prospect than a policy with a limited or no conversion option. Ultimately, the value of a term policy as a life settlement is dependent upon the permanent policy it can be converted into and the person it is insuring.
Currently, institutional buyers are not purchasing non-convertible term policies as they carry too much inherent risk that the policy may not mature with a death benefit before the end of the term. For this reason, convertible term policies are more attractive for life settlements.