At Ashar Group, we have the privilege of helping individuals recover much-needed cash through the sale of their existing life insurance policies to licensed institutional buyers. Time and time again, we have seen life settlement transactions relieve financial stress associated with retirement, medical expenses, and long-term care needs.
It’s a common misconception that policies rich in cash are the most popular investments. Research shows that this is not the case. Universal life and convertible term products represent more than 90% of the policies purchased by buyers on the secondary market.
What are purchasers actually looking for?
A buyer wants the best return possible on their investment. This means they want to pay the least amount of money for the least amount of time. Policies with a lot of cash value require the buyer to outlay more funds upfront in order to offer the policy owner more than what they would receive if they surrendered the policy. Generally, policies low in cash value are more attractive to buyers in the current market.
Insureds age 65 or older who have experienced a decline in health since the policy was issued
For the buyer, an insured’s change in health translates to a shorter investment period and a higher rate of return. A shorter investment period requires less cash value to carry the policy to full term. This is why investors often choose to invest in a policy when the insured is 65 or older and has had a change in health since the policy was issued.
Any insured, no matter what age, with a life expectancy of 15 years +/-
The majority of policyholders who sell their life insurance are over the age of 65. Those who are younger, however, can sell their policies if they have significant health conditions. A policyholder’s life expectancy is viewed as an investment risk. If many years go by since the initial investment, the buyer will receive a reduced rate of return. When a buyer can rule out the life expectancy risk from the outset, they are more likely to invest in a policy.
Any insured age 80 or greater
Again, in the eyes of a buyer, a shorter holding period is better than a longer one. Individuals who are 80 years of age or older present a greater opportunity for buyers.
Case Discussion – Term Insurance Life Settlement
Let’s explore exit strategies for an existing term insurance policy. In the following scenario, the policy belongs to someone whose health is in decline.
When a person’s health changes for the worse, often their priorities change as well. Money might be needed for immediate expenses as well as long-term care. Selling an unneeded life insurance policy is a way to fund such needs.
We have found that when a policyholder’s advisory team can effectively collaborate and address concerns, the process goes smoothly. Ashar Group’s responsibility as a broker is to ensure the policyholder’s best interests are met by creating competition among licensed buyers. In some scenarios, the advisory team may decide on a partial term conversion. Partial term conversions allow policyholders to convert a portion of their life insurance into a permanent policy. Sometimes only a portion is sold and a portion is retained for the original purpose.
For more information on how the life settlement process works, and whether it is an option for your client, give us a call or take our 7-question policy value quiz. Our team of experts is dedicated to asking and answering the crucial questions that will help you make informed decisions. Though a life settlement isn’t right for everyone, Ashar Group can be part of the process of determining whether it makes sense for your client’s situation.