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We often talk about life settlements, the liquidity they provide, and the many ways they can improve the lives of your clients. Every case is different, but there’s one common thread you find running through all of them: life settlements are about seizing opportunity. Sometimes, things we see as necessities often become monetarily cumbersome, but may alternately possess a beneficial financial opportunity as well.
So we thought we would share some examples of people doing just that: seizing the opportunity presented to them through a life settlement.
The Brown’s $1.5 Million Policy
Mr. Brown, a 76-year-old male, owned a $1.5 million universal life insurance policy. The policy was purchased to help the kids pay for college, and to pay off the balance of the mortgage on the home in the event of Mr. Brown passing away unexpectedly. But after the kids had graduated and had good jobs and the mortgage was paid off, the need for the $1.5 million in death benefit was no longer there.
His wife wanted to keep some insurance on Mr. Brown, so their advisor suggested that they explore selling a portion of the policy in the secondary market through a life settlement. Mr. Brown sold $1.25 million of his $1.5 million policy—he retained $250,000 of coverage, and received $125,000 in cash for the remainder.
Ms. Jenkins’ Small Business
Ms. Jenkins owned a small company with a partner. The company held a $2.7 million universal life policy on the partner. When he retired at 78, the policy became outdated and the premiums were a liability. While she considered just cashing the policy in for its $110,000 cash surrender value, her CPA suggested she look into a life settlement. She’s happy she did: the policy fetched a price of over $220,000—double the cash surrender value.
Mrs. Perkins’ Irrevocable Life Insurance Trust (ILIT)
Mrs. Perkins was an 80-year-old widow, and had a $1.7 million universal life policy owned by an irrevocable life insurance trust. But because of the recent changes in estate tax, she no longer had a need for the ILIT, and thereby had no need for the policy. She wanted to help her three grandchildren pay for college, so after discussing with her trustee, she sold the policy in a life settlement. She and her trustee consulted a life settlement expert, and were able to sell the policy for $275,000.
Each of the above cases is very unique, but they provided the insured with an incredible opportunity to earn more on a policy than they expected. If you or your client has a life insurance policy they no longer want or need, don’t you want them to get the most out of it? Visit our qualification calculator to see if it’s a good fit.
Do you have other questions about life settlements? I would be happy to answer them. Call me at 888-849-0887, or email me at firstname.lastname@example.org.