The life settlement industry, previously known as viaticals, has seen significant growth. Life settlements occur when an individual decides to no longer maintain their life insurance policy(s), and a willing market often purchases the policy. The client sells the policy and receives a check, with the life settlement company becoming the owner and assuming responsibility for future premiums. Importantly, the individual insured remains unchanged. It’s advisable to first offer the children the opportunity to take over the policy.
As an advisor, you can significantly benefit your client by facilitating life settlements. In many cases, clients receive more cash than they would from the insurance company’s surrender value. We’ve encountered numerous instances where the difference has been substantial.
In a recent case, a 72-year-old client held a $150,000 Death Benefit Term policy, which typically accrued no cash surrender value. However, the policy had an unexpired conversion privilege to a permanent policy with the existing carrier. Monarch received several offers from settlement companies through a bidding process. The condition typically requested by settlement firms was the client’s conversion to a permanent policy with the existing carrier, which the client fulfilled.
The best offer resulted in a $5,500.00 payment to the client, net of fees. The client was delighted, considering they would have received nothing once the term policy lapsed due to non-payment.
The criteria for eligibility include the insured being aged 70 or older with a minimum $100,000 death benefit. This death benefit can be derived from a single policy or by combining multiple life policies.