Convertible Term Policy for Life Settlement
As money continues to flow into the life settlement marketplace, Term Life Settlements continue to work especially well for both policy holders and investors. From the policy holder's standpoint, settling a term policy can be a great opportunity. Term is usually bought to cover a temporary, rather than permanent, life insurance need. When the need ends, the life insurance policy is usually allowed to lapse. A Term Life Settlement is a great way to obtain some salvage value for a policy that would otherwise terminate without value.
Client was a 70 year old male who owned a 3.5m Transamerica policy nearing the end of its guaranteed premium and conversion period. Insured had decided that full coverage was no longer needed and lapsing of his policy was the alternative. Luckily his advisor recommended having the policy appraised for possible sale instead of lapsing for zero. The insured was in fairly reasonable health and life expectancies that were obtained by LIS ran over 200 months. Buyers at this point found no value in the policy. Typically buyers will find little to no value in policies when life expectancies run over 180 months.
The Solution: A suggestion was made that by splitting the term conversion compensation between the agent and a willing Provider a sale would be viable. The agent agreed to a compensation split of the target premium which made an offer possible through one Provider in particular. The seller received a 107k offer for the sale of the policy and the agent received compensation from the sale of the policy and half the conversion compensation for a policy that otherwise would have been surrendered for zero. For scenarios like this where life expectancies run long, a split in the conversion compensation is a creative way to make an unsellable policy more attractive to investors.
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