A Life Settlement is the sale of a life insurance policy, for an amount in excess of the cash surrender value. It is not unusual for a Life Settlement Provider to agree upon a purchase price for a policy, significantly greater than the value which the insurance carrier would provide directly to the policy owner upon surrender of the policy.
There are many reasons to consider life insurance coverage, as one component of a well thought out estate plan. A key advantage of purchasing life insurance coverage is the tax-free treatment of the death proceeds when eventually paid by the insurance company. Death benefits can far exceed the cumulative premiums for the coverage, and often deliver an Internal Rate of Return (IRR) at death, far in excess of any other asset class the insured may enjoy.
As part of an effective annual review process, knowledgeable insurance advisors can help their clients understand the many advantages of any life insurance policy, including the reasons for retaining or cancelling, such coverage. However, as a practical matter, we also understand that clients’ situations may change over time, and life insurance policies implemented for the best of reasons may no longer make sense. During the annual review process, we may find that our client no longer needs his/her life insurance policy for a variety of reasons, including: decrease in estate size or complexity, premiums may become unaffordable or unattractive, or existing policies may not be delivering expected performance. If the life insurance coverage was acquired for business purposes, the insured may have outlived the risk being insured against, a business partnership may have dissolved or a buy/sell agreement may no longer be needed.
If after review it is determined that existing life insurance coverage is no longer warranted, the Affluence Group, LLC will work along with your legal and tax advisors to explore every option at your disposal. Options traditionally considered include surrender of the policy to the life insurance carrier, in return for the policy cash surrender value or reduced paid-up policy coverage. Alternatively, we will explore if sale of the policy to a Life Settlement Provider may represent a more attractive solution. In addition to outright purchase of your unwanted life policy, the buyer may also be able to assume all future premium payment obligations and provide a reduced amount of death benefit to your beneficiaries.
Unlike applying for a life insurance policy, the appraisal process for a potential life settlement is non-invasive. There are no exams that need to be taken. A client simply signs a release to allow life expectancy underwriters to review the last 5 years of the insured’s medical history. Once that review is completed, Life Settlement Providers will analyze the policy’s cost and decide if they can offer an amount above and beyond the cash value, or a reduced death benefit option. Once a policy has been appraised, we are in the best position to analyze our clients’ options and provide objective guidance.
The Affluence Group team negotiates with the industry’s top Life Settlement Companies in order to provide you with the best possible offer available for your policy in the marketplace. Our professional advisory team has access to leading Life Settlement Providers, and can provide the expertise necessary to facilitate speedy navigation through the appraisal process, and successful pricing negotiations for eventual, attractive offers, for your unwanted life insurance policies.