Life Settlements are Gaining Popularity
In the insurance world, “life settlement” transactions are a new trend gaining popularity. Virtually every insurance professional has heard about this industry in the news, online, or through other professional forums. This innovative and fast growing market has seized the attention of financial markets, insurance professionals, and senior consumers all over America.
A life settlement is a financial transaction in which a policy owner possessing an unneeded or unwanted life insurance policy sells the policy to a third party. The policy is sold for more than the cash value offered by the life insurance company but for less than its death benefit. The purchaser becomes the new beneficiary of the policy and is responsible for all subsequent premium payments
Will this be of benefit?
There are countless scenarios that might encourage a policyholder to exit a life insurance arrangement. Insurance companies mainly offer their customers two choices: lapse or surrender. A life settlement is a third option available to some. This type of transaction is a revolutionary option for a growing number of policy owners. A life insurance policy is a form of property such as a car or a house. Policy owners are free to sell and transfer ownership of their policies. Rather than continuing to pay premiums on a policy that no longer serves its original purpose, life
settlements offer payoffs that can be significantly greater than surrendering a policy. According to LISA’s recently published “Data Collection Report”, policy owners who settled (sold) their policies in 2005 received 371% more cash than the cash surrender value option. Unquestionably, life settlements offer a rational and profitable exit strategy that addresses the financial objectives of policyholders. Investors are attracted to life settlements for a number of reasons. This type of investment provides reasonable expectations of higher than market returns and is not affected by the performance of financial markets. Life Settlements is not an option for every policy owner. The usual candidate for a life settlement is age 65 or older and owns a life policy with a face amount of $250 thousand or more.
A settlement is only possible when the policy’s market value exceeds the cash surrender value. The key factors determining the market value of a policy are the death benefit, cost of premiums, and the life expectancy of the insured. The life expectancy is usually the key driver in determining the market value. In simple terms: the lower the premium and life expectancy, the higher the market value. Market value of policy = present value of death benefit – (present value of future premiums + acquisition costs)
In Summary
Life settlements are complex financial transactions and are generally conducted on behalf of clients by experienced Life Insurance Settlement companies. When representing a client, these professionals have a fiduciary duty to represent the best interests of that client.
A life settlement is a financial transaction in which a policy owner possessing an unneeded or unwanted life insurance policy sells the policy to a third party. The policy is sold for more than the cash value offered by the life insurance company but for less than its death benefit. The purchaser becomes the new beneficiary of the policy and is responsible for all subsequent premium payments
Will this be of benefit?
There are countless scenarios that might encourage a policyholder to exit a life insurance arrangement. Insurance companies mainly offer their customers two choices: lapse or surrender. A life settlement is a third option available to some. This type of transaction is a revolutionary option for a growing number of policy owners. A life insurance policy is a form of property such as a car or a house. Policy owners are free to sell and transfer ownership of their policies. Rather than continuing to pay premiums on a policy that no longer serves its original purpose, life
settlements offer payoffs that can be significantly greater than surrendering a policy. According to LISA’s recently published “Data Collection Report”, policy owners who settled (sold) their policies in 2005 received 371% more cash than the cash surrender value option. Unquestionably, life settlements offer a rational and profitable exit strategy that addresses the financial objectives of policyholders. Investors are attracted to life settlements for a number of reasons. This type of investment provides reasonable expectations of higher than market returns and is not affected by the performance of financial markets. Life Settlements is not an option for every policy owner. The usual candidate for a life settlement is age 65 or older and owns a life policy with a face amount of $250 thousand or more.
A settlement is only possible when the policy’s market value exceeds the cash surrender value. The key factors determining the market value of a policy are the death benefit, cost of premiums, and the life expectancy of the insured. The life expectancy is usually the key driver in determining the market value. In simple terms: the lower the premium and life expectancy, the higher the market value. Market value of policy = present value of death benefit – (present value of future premiums + acquisition costs)
In Summary
Life settlements are complex financial transactions and are generally conducted on behalf of clients by experienced Life Insurance Settlement companies. When representing a client, these professionals have a fiduciary duty to represent the best interests of that client.
posted by Life Settlement Pro at 1:34 PM
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