Policy owners now have more options and control than ever before thanks to the secondary market for life settlements, which has allowed policy holders to put a value on what may be their largest asset. In fact, it’s no different than putting a value on a house on the open market.
And just like the transaction process with a house, the process for determining Fair Market Value (FMV) is very similar. Legislation has changed to protect the rights of the policy holders so they can sell their policies for the most competitive bid. This legislation also includes the right to be informed about the opportunities presented by the market and the right to privacy throughout the transaction. These factors in in turn have helped open up the market, while piquing the interest of the policy holder’s advisor to determine a FMV in the secondary market.
A SMV®, or Secondary Market Valuation is determined by numerous factors. Of all the factors that are taken into consideration, the one that trumps all others is the life expectancy of the insured, which is what the actuary will use when estimating the valuation of the policy. Typically life settlements are offered to seniors’ age 65 and older with a life expectancy of 15 years or less in most cases. When the cost of premiums is very low, then there are some offers being made for life expectancies greater than 15 years.
The results of the Secondary Market Valuation is also determined by the type of policy owned, whether that’s universal life, whole life and even a convertible term policy all can benefit. Investors choose universal life policies for example, largely due to the flexibility in premium payments.
The bottom line is that a life settlement broker is needed to secure fair market value by creating an environment that encourages a competitive bidding process. An SMV®, or Secondary Market Valuation, incorporates the impact of obtaining a variety of competitive bids from a multitude of prospective institutional buyers to ensure that the highest value possible is obtained. An experienced life settlement broker has the knowledge and experience to help make this happen.
If you are in a position where you think it would be prudent to consider alternatives, talk to a secondary advisor. You can also go to
https://ashargroup.com/policy-value-questionnaire/ to take the first steps in determining if a policy may qualify for a life settlement.