The life settlement marketplace has really opened up. Growing confidence in life expectancies and the need for investments that offer alternatives to the low interest rate environment, plus the now pricey stock market, has money flowing back into life settlements. Here are some recent cases of ours that illustrate just how much the market has improved for sellers:
1. Because the life expectancy of the last–to-die of two lives is usually far greater than a single life, investors have traditionally stayed away from putting money into survivorship policies. That is changing as investors are now realizing that even with longer life expectancies, these policies can be good investments as they are often well-priced with very low carrying costs.
We recently sold a $10 million survivorship policy on a male, age 78, and on a female, age 77, that was purchased to offset estate taxes, but was no longer needed due to a decline in the value of their estate and the increased estate tax exclusion. They received $127,000 for the policy, which had a cash surrender value of zero.
2. Unlike survivorship, convertible term policies have continually been our best, but most frequently overlooked, prospects for life settlements. In a recent case, a 70 year-old male owned a $500,000 20-year term policy that had 4 years to go, but was at the end of the conversion period and he could not afford to convert it. His life expectancy was assessed at about 9 years and we were able to get him an offer of $89,000.