Asset Life Settlements, LLC recently announced that an analysis of the company’s life settlement transactions over the past year indicates seniors and retired business executives are selling their unwanted policies to address a wide range of financial challenges.
“Some life settlements, especially those involving high net worth clients, often require complex strategies to achieve a favorable outcome,” said Scott Thomas, Co-Founder of the Orlando-based life settlement brokerage and secondary market advisory firm.
“When selling large policies, it’s important to use an experienced broker who is familiar with the technical aspects of estate planning and one who has the skill to negotiate with secondary market buyers,” Thomas said.
As an example, Thomas noted a transaction involving a $2.2 million policy with 10% annual premiums owned by an 86-year-old. The policy was initially purchased using premium financing and collateralized by the insured’s $800,000 annuity.
Unfortunately, the policy did not perform as illustrated and the insured struggled to make the loan payments. The policy had a cash surrender value of only $130,000 and the client was facing foreclosure on the loan totaling $930,000.
Thomas negotiated between the lender and the buyer to craft a life settlement rescue strategy that resulted in a cash settlement of $510,000. The life settlement minimized the client’s level of debt, forestalled foreclosure on the loan, and kept the annuity intact.
Company Co-Founder Jeff Hallman noted that Asset Life Settlements specializes in negotiating “win-win solutions” involving complex cases in spite of the odds.
Hallman cited a recent case involving a 74-year old businessman who felt burdened by annual premiums of $254,000 for a $10 million corporate-owned life insurance policy that he no longer needed. He asked Hallman to explore whether he would qualify for a cash settlement that was double the policy’s cash surrender value of $309,000. Hallman noted that the insured’s life expectancy was greater than 15 years – far beyond the 12-year limit as required by most buyers. Irrespective of the challenges, Hallman negotiated with buyers based on the overall merits of the transaction and was able to meet the client’s expectations with a $600,000 cash settlement.
Industry statistics say an estimated $143 billion in life insurance owned by policyholders 65 and older lapsed in 2015, and 90% of seniors would have considered a life settlement had they been aware of the option.
A Conning study found that policies resulting in life settlements represent less than 1% of all policies issued by carriers, giving life settlements lots of room for growth.