(Related: Solving the Mystery of Term Life Settlements)
Until recently, it was almost impossible to get a life settlement offer unless the insured had some health issues which reduced the life expectancy. However, there is a fund that has developed a proprietary strategy that has made it possible to get life settlement offers on some healthy insureds that meet certain criteria.
- Minimum Age: Males 73, Females 75 (best chance 80-90 years old).
- Health: Good health, with no mental impairments.
- Policy Age: 5 or more years, occasionally less, but at least 2 years.
- Face Amount: $250,000 to $20,000,000.
- Policy Type: Almost any form of universal life.
- Policy Pricing (level premium illustration to age 105 required): Ages 80-85, premium under 4% of face; Ages 86-90, premium under 6% of face.
How do they do it? While they haven’t shared all the details of their proprietary strategy, we know that it requires a favorably priced policy and no medical records or life expectancy evaluations. The combination of a well-priced policy and reduced acquisition costs allow them to make offers on policies that others can’t. And, because of their simplified underwriting process, offers can usually be made within a few days.
Some recent case examples:
- An 86-year-old female in good health with $600,000 universal life policy felt she could no longer afford the premiums. An in-force ledger to age 105 showed a level premium to death benefit ratio of about 6%. While typical funders had no interest, she received $130,000 for her policy.
- A $3.5 million guaranteed universal life policy on an 80-year-old male in good health had been purchased for estate planning purposes. Estate tax law changes made the policy unnecessary. The premium to face ratio was 3.6% and the net amount paid to the client was $510,000.
All hope is not lost for a life settlement on a healthy client, even if they have already been rejected by traditional funders. If you have a client with a policy that is no longer wanted, needed or affordable and fits these parameters, you might be able to get them a life settlement offer. On behalf of your clients, remember, it can’t hurt to try; it can only hurt them not to.
Robin S. Weinberger, CLU, ChFC, CLTC, is the director of national accounts for Life Insurance Settlements Inc. She has been a general agent and director of national accounts for Connecticut Mutual and vice president of marketing for Sun Life of Canada. She can be reached at firstname.lastname@example.org or (617) 451-3343.
Peter N. Katz, JD, CLU, ChFC, RICP, is a life settlement broker and co-director of national accounts with Life Insurance Settlements Inc. He is also a consultant specializing in life insurance advanced sales illustrations, and he has served as an advanced markets attorney and in product development. He can be reached at email@example.com or (860) 937-2936.