Over the past several years, an informal secondary market has developed for the purchase or sale of existing life insurance policies. Prior to this new opportunity, owners of life insurance policies generally had only one place to go when surrendering their coverage: the life insurance company which had issued the policy. In some cases, the surrender value of a life insurance policy was fairly close to the actual value of the policy, and represented an important settlement option for the owner. However, there have been many cases where the surrender value was far less than the true value of the policy, especially if the insured was elderly or in poor health. Given this development in the marketplace, it is incumbent on advisors to consider whether your clients can obtain a higher payment from the settlement market than is being offered by the life insurance company.
AdvisorServe can help you uncover competing offers for an existing policy prior to your acceptance of an insurance company’s surrender value. As a general rule, the secondary market may be more attractive for those clients over age 75 or with significant health issues. When you request our help, we will gather the necessary information about the policy under consideration, arrange for the review of your client’s medical records (no exams required, only a signed authorization), and then seek competing offers.
A life settlement can be a relatively complex transaction. AdvisorServe will review with you many of the important aspects and details that you should consider with your client. We believe that your attention to potential life settlements can be a significant way to fulfill your role as a trusted advisor.
Life Settlements Disclosure: Investors should consult with their own professional advisor regarding the potential tax, estate, and legal considerations that may arise in connection with entering into a life settlements transaction. Proceeds from a life settlement transaction may be taxable under federal or state law to the extent the proceeds exceed the cost basis. The proceeds from a life settlement transaction may be subject to claims of creditors. The receipt of proceeds from a life settlement transaction may adversely impact eligibility for government benefits and entitlements. The amount received for the sale of the Policy may be impacted by the circumstances of the particular purchaser of the Policy, the insured’s life expectancy, future premiums, the death benefit, the terms of the Policy, and the current market for insurance policies, among other factors. The amount received for the sale of the Policy may be more or less than what others might receive for the sale of a similar policy. There may be high fees associated with the sell of a Life settlement.