Young, Healthy Insureds in Life Settlement Cases That Worked
The market for unwanted life insurance policies is much more flexible than it used to be.
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.
He was going to drop it and walk away with nothing.
The policy was still convertible. The client had minor health issues, and a long life expectancy.
The policy sold for $75,000, or 0.75% of the face amount.
In addition, the advisor retained the conversion commission on the converted policy.
Yes, in both of these cases the policies did not sell for much, relative to the face value.
But, the clients are happy in obtaining something, rather than walking away with nothing.
As you can see, both of these clients are young for the life settlements market, and relatively healthy.
So, keep your eyes open for younger clients, especially if they have convertible term policies and higher face amounts — those over $1 million .
Most advisors would not think these types of policies could sell, but as stated before, the life settlements market has become more flexible, thanks to more investor money flowing in.
The moral of this story is whenever you have a client that no longer wants, needs or can afford their life insurance policy, and they are going to lapse or surrender it, consider a life settlement.
True, this is not a solution for clients who are 30 years old and running marathons.
But a life settlement can be a solution for more clients than you may think.
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(Photo: Adobe Stock)