On April 20, 2009, we published the first of these newsletters about life settlements. At that time, it was a relatively new transaction and many insurance companies actively discouraged or barred their producers from negotiating a life settlement on behalf of their clients.

And today, in a now well-regulated industry, thousands of successful life settlements have been transacted, bringing billions of dollars to policyholders. When done for the right reason, as an alternative to the lapse or surrender of a policy, a life settlement can provide significant benefits to the policyholder.

Sadly, 15 years later, many producers still find themselves in the same position, unable to help their clients with a life settlement transaction as many insurance companies or broker-dealers continue to inhibit their producers. And we are still writing about life settlements, trying to create awareness and to educate producers, accountants, attorneys and trust officers.

So why do some life insurers still block life settlements? A major reason is because life insurance companies would prefer that policies get lapsed or surrendered, rather than staying on the books until a death claim occurs. Yet, the number of policies that get settled each year, as a percentage of in force business, is so small that it really shouldn’t have a significant impact on insurance company financials. But a life settlement could have a very significant impact for a policyholder or their family needing money for medical services, to pay bills, to supplement income, to provide educational funds for a grandchild – or perhaps to help maintain their life with dignity!

The 2023 Life Insurance Settlement Association’s Data Collection Survey found that during the year approximately 3,200 policies were settled. As a
result, consumers received $842 million in life settlement proceeds, $707 million (about 6 times) more cash than they would have received if they just surrendered their policies. But these numbers
should certainly be even higher! Even after all this time, consumer awareness is still not what it should be.

With life settlement companies running commercials and ads, the option of a life settlement is becoming more well-known. As folks are hearing of this option, they are beginning to ask their advisors if they can help with this transaction, but they shouldn’t have to ask! Advisors should be aware of their clients’ circumstances and be able to recognize the 7 most common situations where a life settlement could be appropriate:

1. The sale of a business or other liquid asset
2. Business owner retiring or exiting from the business
3. A decline in estate value and/or a decrease in estate tax liability
4. Term policies or riders that are about to expire, lose their conversion
privilege or come to the end of the level premium guarantee period
5. Retirement
6. Policy is no longer affordable due to poor policy performance or a
change in the client’s finances
7. Chronic illness

Life settlements are rapidly becoming a hot topic as life settlement articles, blogs, and podcasts seem to be everywhere. And, suddenly, everyone is an expert – but are they really??? It’s important to do your due diligence to determine just how qualified are the people that you choose to work with. Some things to find out:

· How much do they know about life insurance?
· How many potential buyers do they go to (so they can help your clients get their policies priced at the full market value)?
· How much experience do they have in the business?
· Do they follow all the state regulations?
· Do they have errors and omissions insurance?
· Do they manage the whole process with complete transparency?

After 135 newsletters, our message is still the same as it was in the first issue:
If your client no longer has a need for coverage or cannot afford to pay the premiums, a life settlement offers the opportunity to get significantly more than the cash surrender value. Life settlements continue to thrive as a way to help clients maximize the value of their
unwanted life insurance policies.

We are not going to stop talking about life settlements and we hope that, as a result, you begin to as well. Your clients need you and they count on you! As situations come up, please be sure to give us a call. As we are known to say, “it can’t hurt to try – it can only hurt not to.”

Contact us:

© 2023 Peter N. Katz. All rights reserved.

Robin and Peter | 220 Boylston Street, #1204, Boston, MA 02116