We are still baffled by how many term life settlement opportunities are missed. In many instances, we are called by an agent after the expiration of the conversion privilege because they didn’t pay attention to when it expired.
Others simply still don’t know that term policies can be sold in a life settlement.
Here’s a brief Q & A that should help:
1. Can a term policy be sold in a life settlement?
Yes! Yes! Yes!
Like a life settlement on a universal life policy, the insured should generally be age 65 or older and have had some decline in health since the policy was issued. Term policies make great life settlement candidates because of their very nature. They are typically bought for an insurance need that is temporary.
This is unlike permanent policies, where the policy owner typically has a long duration or life time insurance need. In addition, because there is no cash value when a term policy lapses, any offer that you get will certainly be appreciated.
2. Are there special requirements for selling a term insurance policy?
Most life settlement buyers will only consider term policies that are convertible to some form of universal life. Usually, once a term policy goes beyond its initial premium guarantee period, the premiums skyrocket making the policy unattractive to life settlement investors. So, being able to rein in the future premium obligations through a conversion is usually essential.
3. Is it possible to sell a non-convertible term policy in a life settlement?
Yes, but it is quite rare. It requires an insured that has a serious terminal illness, such as a metastasized cancer or ALS, with a short, highly predictable, life expectancy. In such an instance, a life settlement investor may consider buying the policy, even facing extraordinarily high premiums as they would likely be for a very limited number of years. However, there are additional considerations with such an insured.