This senior couple faced several financial challenges. The wife was recently diagnosed with advanced Alzheimer’s disease and they needed cash to help pay for her care. Secondly, they felt financially burdened by the annual premium for a $500,000 term policy that was nearing its expiration. Inasmuch as the death benefit far exceeded their current need for income protection, the couple had planned to let most of the coverage expire/lapse until their insurance advisor presented an alternative solution involving a life settlement.
4. An Insured With a Policy Near Expiration
This 74-year-old insured’s term policy was nearing its expiration. The client sought the guidance of his registered rep who explored all the options. Although the rep determined that a life settlement was clearly in the best interest of the client, the rep’s broker-dealer declined to facilitate the transaction. The rep referred the case directly to our firm, and we negotiated a cash settlement of $172,000 on behalf of his client. The client was thrilled to receive a cash windfall to supplement his retirement income.
5. A Key Man Term Policy
This case involved a $1.5 million term policy that had been purchased 19 years prior on a 60-year-old owner/employee. The original purpose for the key man policy was to provide the business with the necessary cash flow in order to buy back company stock in the event of the employee’s death. When the insured reached the age of 75 and the term policy was nearing expiration, the company’s insurance agent facilitated the conversion of the key man term policy to a universal life policy. Four years later when the insured turned 79 and was fully retired, the company sold the UL policy and received a cash windfall of $161,250.
A Policy Owner’s Best Interest
Living until age 100 is the new reality for many of your clients. For seniors who have a fear of outliving their retirement savings, the proceeds from a term conversion life settlement can provide a source of unexpected cash and peace of mind.
We encourage financial professionals and insurance agents to help expand awareness of the life settlement option by sharing these case examples with your clients and your referral network. Many of the agents that we work with often circulate life settlement case examples among their centers of influence as a client generation tool.
In today’s fiduciary-conscious financial sector where the phrase “in the consumer’s best interests” is more frequently found in existing or proposed state and federal regulations, clients expect more transparency from their advisors and insurance agents. In the cases illustrated above where the policies were on the verge of lapsing, the outcomes were clearly in the best interests of the policy owners.
Optimizing the market value of unwanted policies in the secondary market requires an experienced life settlement broker who has a fiduciary duty to the policy seller to negotiate the highest possible offer. If you have questions about the life settlement transactions discussed in this article or if you want to consult on a potential case, feel free to contact us.
Jeff Hallman is a co-founder and managing partner at Asset Life Settlement LLC. He has been involved in case submission, underwriting, compliance, the institutional bidding process, life expectancy analyses and contract negotiation in the life settlement market. He can be reached at 888-335-4769 x1108.