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October 23, 2023 at 07:42 AM
What You Need to Know
- In most cases, prospects should be ages 70 or older.
- To sell a policy, younger insureds should have significant health problems.
- Insureds under 65 must have very serious and predictable health problems.
For a life settlement case to close, three key elements must invariably exist: the right insured, the right policy and the right situation.
The presence of these three crucial elements can’t guarantee a successful case, but, together, makes it definitely worth a try.
1. Know the insured.
Generally, prospects should be age 70 and above with some decline in health since the policy was issued.
Typically, the insured is now highly rated or uninsurable.
The younger the insured, the more significant the health issues must be.
Occasionally policies sell at younger ages (under 65), but the insured would have to have very, very serious and predictable health problems, such as ALS, or metastasized cancer.
2. Know the policy.
Universal life insurance and term life that is convertible to universal life are the most attractive policies to investors.
Term policies are frequently overlooked by producers, even though they often make excellent life settlement prospects.
A whole life policy, on the other hand, builds significant cash value. It would need to attract offers that exceed the surrender value, and that rarely happens.
Survivorship policies with only one insured still living also make excellent settlement prospects.
If both insureds are still alive, survivorship policies are not commonly purchased, but it is possible if both are in very poor health.
Owners of guaranteed universal life and guaranteed survivorship universal life policies on insureds in their 70s and above, even if healthy, also make excellent prospects.
Generally, face amounts of $500,000 and up are preferred, but there are exceptions that go down to as low as $100,000.
The smaller the face amount, the shorter the life expectancy must be for settlement buyers to be interested.
Additionally, life settlement buyers prefer policies from well-rated insurance companies.
3. Know the situation.
A life settlement is an alternative to terminating a policy, not to keeping one.
The owner should sell only if, if the policy were not sold, it would be lapsed or surrendered.
There are many reasons a policy may be lapsed or surrendered, but certain scenarios seem to be the most common for a successful life settlement, so be sure to keep a special look out for them.
1. Term policies or riders that are about to expire or come to the end of their current premium guarantee or lose their conversion privilege. Owners of term policies are the life settlement prospects who most regularly go unnoticed.
Many advisors and clients don’t realize that a term policy (including group term), if convertible, can be sold in a life settlement.
Since term policies almost never have cash surrender value, a life settlement can truly provide “found” money.
2. Retirement. People commonly review their financial resources and expenses upon entering retirement and, at that time, it is quite common to find policies that are no longer needed that were bought to replace income upon the death of a wage earner.
Additionally, the cost of such policies, especially if term insurance, may become unaffordable.
These policies can be great candidates for a life settlement and the proceeds can really make a difference in retirement.
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 