A life settlement is a financial transaction in which a policy owner who owns an unnecessary or unwanted life insurance policy sells the policy to a third party for more than the cash value offered by the life insurance company. The purchaser becomes the new beneficiary of the policy at expiration and is responsible for all subsequent premium payments. Life settlements are an important development because they have opened up a secondary market for life insurance where policy owners can access the fair market value of their policies, rather than accepting the lower cash surrender value of the issuing life insurance company.
Generally speaking, life settlements are an option for high-net-worth policy owners age 65 and older. Independent estimates report that among this group, 20% of policies have a market value that exceeds the cash value offered by the insurer. And while many policyholders aren’t familiar with life settlements until a financial professional mentions the option to them, the concept has caught the attention of high-profile advocates like Warren Buffett, former U.S. Representative Bill Gradison, and numerous others. media outlets, including The Wall Street Journal. , Time Magazine, Business Week and The Economist. A growing number of experts now believe that informing clients of life settlement offerings should be part of a financial advisor’s fiduciary duty.
How does it work
In a life settlement transaction, there is a chain from the seller of the policy to the ultimate purchaser of the policy (known as life settlement provider.) Each link in the chain has a different responsibility to facilitate the transaction and ensure it runs smoothly, while third-party providers often assist the provider with specialized functions.
It’s what we do
Our niche was formed to meet the changing demands of trusted advisors and their clientele, who are increasingly taking advantage of the burgeoning secondary life insurance market. The market is booming as customers become aware of the $108 billion* of existing policies that have unrealized potential above their cash surrender values. Advisors maximize these gains for our clients, who are rapidly becoming more sophisticated and aware of these opportunities. Our directors have more than 75 years of combined experience in financial planning and insurance, helping to integrate life settlements into the client’s financial, estate and/or other objectives. All principles maintain NASD securities licenses (in good standing) and offer broker/dealer services to facilitate life settlements on variable policies. Variable policies are considered by many to be considered securities transactions.
This process used by our advisors ensures your client the best possible offer for their policy. This process includes understanding the client’s objective, reviewing alternative solutions (if requested) with their advisors, pre-qualifying all cases for likelihood of settlement, reviewing each case by internal impaired risk specialists before it goes to market , and progress the case and offers transparency through the patented TOP program.
