Candidates for Life Settlements

Life insurance is a valuable product and serves an important purpose in your client's financial portfolio. Oftentimes, however, people's needs and circumstances change, while policies don't.

When a policy is no longer needed, the life settlement marketplace offers an important alternative to "cashing in" or letting a policy lapse. Outlined below are examples of situations that may create an opportunity for your senior clients to reconsider the necessity of a life insurance policy.

• A safety net for beneficiaries is no longer needed due to lifetime wealth
    accumulation, changes in marital status or the maturity of children.
• The policy owner is over insured or wishes to dispose of an existing policy
     to execute a more appropriate one.
• Sale, dissolution or bankruptcy of a business eliminates the need for
     key-person policies or buy-sell agreement coverage.
• Tax law changes have reduced the need to subsidize estate taxes.
• A family or medical emergency arises.
• Insurance policy premiums have become unaffordable.
• Business loans secured by the policy have been repaid.
• Stock market volatility has diminished retirement income.
• A need exists to fund a long-term care program.

Those choosing life settlement are usually individuals whose abilities have brought them a degree of affluence. They are open to considering new financial alternatives that might enhance value, often looking to a trusted set of advisors to help them stay informed. Any policy owner, including individuals, corporations, charities or trusts—may sell any life insurance policy, including group and term policies. Policies are sold to qualified buyers for the present value of the net death benefit. The buyer maintains the policy, paying the premiums and eventually collecting the death benefit.

Life settlements empower policy owners to view life insurance as an asset rather than as an expense. Policy owners receive market value for their life insurance policies and no longer have an ongoing premium commitment. Life settlements have become an important financial tool for people to use in managing their investment portfolios.

Policy Criteria for Life Settlements

LSInsights has found that policies meeting the following criteria have the best chance
of generating buyer interest in the secondary market:

• Insured age should be over 65 (male) or 70 (female)
• Net Death Benefit (NDB) over $250,000
• Carrier must be rated B+ or higher
• Premium should be less than 15% of NDB
• Cash surrender value should be less than 40% of NDB