What is a life settlement?
A life settlement is the sale of an existing life insurance policy to an institutional buyer for an amount greater than the cash surrender value and less than the death benefit. A life settlement provides a lucrative alternative to lapsing or surrendering the policy.
There are several reasons why a policy owner would want to sell their life insurance policy to a third party, such as:
- No longer need or want the policy
- Premiums are unaffordable
- Need to fund other areas of retirement
- Outliving original planning
- Pay for medical bills
- Fund long-term care
- Charitable donations
- Avoid bankruptcy
These buyers include state pension plans, endowments, private equities and more. Ideal qualifications include insureds over 70, a decline in health since policy issue, and a face amount of at least $100K. Other factors that can influence buyers are carrier rating and premium cost.
What You Need to Know
As you conduct your research, keep the following in mind when considering a life settlement:
- Regulated Market Place. The life settlement industry is highly regulated and 90% of the population lives within regulated states.
- Reputable Broker. Not all brokers are created equal. For example, Ashar Group has a fiduciary duty to negotiate for the best possible offer on behalf of the policy owner. However other brokers will negotiate for the best possible return on investment for the buyer. It’s important to ask potential brokers which side of the table they sit on before agreeing to enter into a relationship with them.
- The length of the process depends on the availability of information and sensitivity to timing for the policy owner. A broker can negotiate a quick offer; however, this would not allow the policy owner to benefit from true price discovery and buyer competition. Ideally, a policy owner would minimize future premiums and approach the market 90 days prior to needing the settlement proceeds. To help expedite this process, the insured can gather medical records, provide all ownership documents and copy of the policy early on, and participate in joint calls with Ashar Group and the carrier.
- Include Your Financial Advisor. If you have an advisory team, it is always best to have an experienced advocate representing the policy owner to minimize mistakes, save time, and facilitate the auction process. On average, policy owners receive 6-8 times more than the cash surrender value when using Ashar’s policy auction process.
Ashar Group is a licensed life settlement broker that acts as a fiduciary to protect the best interests of policy owners in the life settlement process by creating a competitive auction to deliver the highest value to the seller. Ashar Group is an independent seller’s representative and does not sell life insurance, manage assets, or purchase policies. Contact us to start your consultation.