Producers frequently call us to determine whether or not their client might be a candidate for a life settlement. Usually our answer begins with a qualifying list of the most common parameters: age of at least 65, some decline in health since the policy was issued, single-life universal life or survivorship universal life with one deceased, or term convertible to universal life.
But the most important qualifying criteria should truly be whether or not the client is about to lapse or surrender the policy. If a policyholder still has a need for the death benefit or would like to continue the coverage and has the ability to pay for it, it should undoubtedly be retained rather than sold as a life settlement.
Another way this qualifying issue gets framed is by the client saying: “I want to sell my policy if I get a good enough offer.” Essentially this means that client isnot looking at a life settlement as an alternative to lapse or surrender, but rather as a way to make a quick buck. However, under current market conditions, what they would be doing is selling the policy at a deep discount. The beneficiaries will be much better off if the policy is kept – even if the beneficiaries have to pay the ongoing premiums themselves.