By Robin S. Weinberger and Peter N. Katz | June 24, 2020 at 12:39 AM
Life settlement veterans describe how some recent transactions
did (or didn't) come together.
Life settlements
should be viewed as an alternative to lapse or surrender, not as an alternative
to keeping the coverage.
Once your clients understand this, it opens up
the possibility to do one more good thing for them before their policy is
terminated. Frequently, this infusion of cash makes a meaningful difference to
the policy owners at a critical time in their lives.
Here are several cases that illustrate why you
should pay attention to this option for your clients.
Male, 91, with a $982,136 guaranteed universal
life (UL) policy from a top carrier and a life expectancy of 65 months.
On Aug. 29, 2019, the initial offer was
$325,000. It was bid up several times (three funds were interested). On Oct.
25, 2019, the final offer received was $414,000.
On Oct. 29, 2019, the client declined the
offer and decided to keep the policy, as he wanted a higher amount ($10,000
more!).
On Jan. 6, we got a call from the broker that
the client had changed his mind and wanted to accept the offer. We went back to
the fund with the highest offer and, unfortunately, we were told that the offer
was no longer available. We then went back to all the funds and, this
time, the best offer that we could get was $350,000. On Jan. 23, the client
again declined the offer and decided to keep the policy.
What makes this case interesting is to note
that timing is everything: Funds available for investment don’t remain idle;
they move on to other policies.
Male, 67, with a $2 million term policy from a top
carrier and a life expectancy of 196 months.
The policy owner received $31,147. What makes
this case interesting is that, although $31,147 is only 1.5% of the face
amount, the client was thrilled to get the cash as opposed to lapsing the
policy and getting zero.
Male, 77, in great health with a $1 million guaranteed UL policy
from a top carrier.
The seller received $106,783. What makes this
case interesting is that we were able to get an offer based just on the
guaranteed premiums to age 105. Because he was in such good health, medical
records weren’t needed. Guaranteed UL and guaranteed survivorship UL contracts
on healthy people in their mid 70s and up can have surprising value in the life
settlement market.
Female, 91, with a $2 million UL policy from a top
carrier and a life expectancy of 38 months.
The insured had already tried to sell this
policy about a year and a half prior. At that time, her life expectancy was 77
months. The highest offer was $250,000.
The family decided to keep the coverage and
try to continue paying the premiums. But a year and a half later, the family
determined that, although their mother’s health had deteriorated, they could no
longer afford the premium payments. They needed money for their mother’s care,
back bills, etc. This time the highest offer was $795,000. What makes this case
interesting is that, in the interim, the insured’s health had gotten much
worse. Although it seemed to make even more sense to hold on to the coverage,
it was simply unaffordable. The money from the policy sale was a huge source of
relief for the family.
It’s important to stay knowledgeable about
your clients’ situations and make sure that they are aware of the life
settlement option.
You don’t want to be on the receiving end of
the all too frequent phone call, “My policy lapsed — is it too late to look
into a life settlement?” As opportunities come up, be sure to explore the
potential of a settlement.
As we always say, “It can’t hurt to try — it
can only hurt not to!”
obin S. Weinberger, CLU, ChFC, CLTC, is
the director of national accounts for Life Insurance Settlements Inc. She has
been a general agent and director of national accounts for Connecticut Mutual
and vice president of marketing for Sun Life of Canada. She can be reached
at robin@lisettlements.com or (617)
451-3343.
Peter N. Katz, JD, CLU, ChFC, RICP, is a
life settlement broker and co-director of national accounts with Life Insurance
Settlements Inc. He is also a consultant specializing in life insurance
advanced sales illustrations, and he has served as an advanced markets attorney
and in product development. He can be reached at pkatzlife@yahoo.com or
(860) 937-2936.
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