What You Need to Know
- Guaranteed universal life policies are popular.
- That includes survivorship guaranteed guaranteed universal life policies.
- Some term life policies can turn into universal life policies.
While there is always some ebb and flow in the life settlement marketplace, currently two types of policies are the top prospects. Guaranteed universal life policies and term policies that are convertible to universal life seem to get the highest interest among buyers and result in the most sales. Unfortunately, these life settlement opportunities are all too frequently missed.
Universal life policies with premium guarantees to at least age 105 are attractive to prospective buyers because of the certainty provided by the premium guarantee. Since these policies usually have little or no cash surrender value, the proceeds of a life settlement often represent ‘found money’ to sellers.
Here are two recent case examples.
A female, age 84, in “perfect health” with a $5 million survivorship guaranteed UL policy
The husband was deceased. The family no longer wanted to pay for the policy, which was issued 2007 and had zero cash surrender value. Although we received some substantial cash offers, the family was not in need of cash, but rather wanted to keep some of the death benefit. Instead, we got them a retained death benefit offer of $2 million. A retained death benefit is where the buyers take full responsibility for maintaining the policy but irrevocably commit some portion of the death benefit to the sellers. The policy owners loved the idea — keep some of the death benefit, but not have to pay any more premiums.
What Your Peers Are Reading
A male, age 93 and a female, age 90 had a $2,600,000 survivorship guaranteed UL policy, issued in 2008, with a cash surrender value of $184,500
He had mild health issues and she was in great health. They could no longer afford the premiums and called their agent to help them surrender the policy for the cash. The agent told them about life settlements and, as a result, we got them an offer of $550,000 – about three times the surrender value.
Term policies that are convertible to universal life also make great prospects for a life settlement. Some producers and many, many policy owners are still unaware that these term policies can be sold in a life settlement transaction. Furthermore, term conversion life settlements typically result in a conversion commission, in addition to the life settlement compensation.