The Life Insurance Settlement Association (LISA) recently released 2021 industry data compiled from its provider members, who represent about 95% of the entire industry. The numbers show a healthy and growing industry that has supplied, over the years, billions of dollars to policy owners in excess of what they would have received had they lapsed or surrendered their policy. Are your clients benefitting from the secondary market for their policies???

In 2021, more than 3,000 life settlements were transacted. As a result of these sales, more than $750 million was paid to consumers by life settlement buyers. Had those policies been surrendered to insurers for their cash surrendervalue, the policy owners would have received only $96 million. So, the life settlement industry added more than $650 million dollars to the pockets of policy owners.

The total face amount of those 3,000 policies exceeded $4 billion with an average policy face amount of about $1.33 million dollars. Yet these sales represent just a tiny fraction of the 9 million plus policies and $642 billion in face amount that are lapsed or surrendered each year by life insurance policy owners. Sadly, there are thousands of policies that are never evaluated for their life settlement value. Billions of dollars of policy owner value is likely being left on the table.

Consider these recent cases that might have lost out:

• Rather than surrendering a $1,500,000 Universal Life policy and getting $65,234, this policy owner settled their policy and netted$275,000 – over 4 times as much.

• A $500,000 term policy was going to lapse without any value. Instead, the policyowner settled it and got $20,000. $20,000 vs. 0!

While the 2021 figures show strong growth of life settlements, the amount of money lost on policies that are lapsed or surrendered without review continues to be staggering. As a trusted advisor, it is your obligation to make sure your clients are aware of the life settlement option. To make that easy for you to do, we have sample letters, available on request, which can be sent to your clients and their advisors informing them about life settlements and that you are able to help them with this transaction.

Remember, a life settlement is an alternative to lapse or surrender. Once the decision has been made to lapse or surrender a policy, don’t let your clients fall into the statistic of policies that are terminated without being evaluated for additional money from the life settlement market. It can’t hurt to try – it can only hurt not to!