What You Need to Know
- A 57-year-old man with one moderately bad exam reading found a buyer for a universal life policy.
- A 61-year-old man with minor health issues and a big convertible term life policy found a buyer.
- Higher face amounts help.
When I speak to advisors, many think that a client needs to be seriously ill, or well into their 80s or 90s for a life settlement transaction to take place.
As one recent advisor put it, “Lisa, buyers are only looking for clients who have one foot in the grave, and one foot on a banana peel.”
Nothing could be further from the truth! The life settlement market has become much more flexible in terms of the types of clients whose policies are being sold.
While it is true that the shorter a client’s life expectancy is, the more value that policy will bring in the life settlement market.
And, you probably have seen some advertising that states clients need to be age 70 or older with a $100,000 face value policy or higher.
This is the typical life settlement market.
But, it may surprise you to know that we routinely sell client’s life insurance policies for people who are under 70.
And yes, some of these clients have significant health issues.
But, many don’t, and are fairly healthy.
Convertible term policies can be very marketable for clients who are on the younger end for the life settlement market.
Here are two examples of young, fairly healthy clients that sold their policies:
57-Year-Old Man: $3 Million UL Policy
There is no cash. The client no longer wants the policy and is going to drop it.
He rarely goes to the doctor, and the most recent medical records showed him to be healthy.
However, he was applying for new coverage, and the paramed exam for the new policy showed elevated A1C, or blood sugar. That is it. Everything else was perfect.
The policy sold for $30,000, or 1% of the face amount.
61-Year-Old Man: $10 Million Term Policy
This gentleman sold his company and didn’t need the key-person policy any longer.