Life Settlements Made a $654 Million Difference
That’s the gap between what buyers paid for policies in 2021 and the policies’ total cash surrender value.
The Life Insurance Settlement Association recently released 2021 industry data compiled from LISA provider members, which represent about 95% of the entire industry.
The LISA numbers show a healthy and growing industry that has supplied, over the years, billions of dollars to policy owners in excess of what they would have received had they lapsed or surrendered their policy.
Are your clients benefiting from the secondary market for their policies?
The Data
In 2021, more than 3,000 life settlements were transacted.
As a result of these sales, more than $750 million, or about $250,000 per policy, was paid to consumers by life settlement buyers.
Had those policies been surrendered to insurers for their cash surrender value, the policy owners would have received only $96 million.
So, the life settlement industry added more that $650 million dollars to the pockets of policy owners.
The total face amount of those 3,000 policies exceeded $4 billion with an average policy face amount of about $1.33 million dollars.
The Surrender Problem
These sales represent just a tiny fraction of the 9 million plus policies and $642 billion in face amount that are lapsed or surrendered each year by life insurance policy owners.
Sadly, there are thousands of policies that are never evaluated for their life settlement value.
Billions of dollars of policy owner value is likely being left on the table.
Recent Policy Sales
Consider these recent cases that might have lost out:
- Rather than surrendering a $1,500,000 universal life policy and getting $65,234, one policyowner settled a policy and netted $275,000 — over 4 times as much.
- A $500,000 term policy was going to lapse without any value. Instead, the policyowner settled it and got $20,000. That’s $20,000 vs. $0.
Communicate
While the 2021 figures show strong growth of life settlements, the amount of money lost on policies that are lapsed or surrendered without review continues to be staggering.
As a trusted advisor, it is your obligation to make sure your clients are aware of the life settlement option.
Remember, a life settlement is an alternative to lapse or surrender.
Once the decision has been made to lapse or surrender a policy, don’t let your clients fall into the statistic of policies that are terminated without being evaluated for additional money from the life settlement market.
It can’t hurt to try. It can only hurt not to.
Peter N. Katz, JD, CLU, ChFC, RICP, is a life settlement broker and co-director of national accounts with Life Insurance Settlements. 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 pkatzlife@yahoo.com or (860) 937-2936.
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