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The Life Settlement Market • The Journal of Structured Finance (Life Settlements: A Secret No More) in the summer of 2006 wrote that the life settlement market continued to expand in 2005 and, depending on the source of the information, was estimated to have been between $10 billion and $20 billion in face amount of policies traded. On the basis of those numbers, the market has doubled and by some estimates, tripled, over the course of the last three years. A life settlement involves the purchase by a third party (i.e., institutional investors such as banks, insurance companies) of a life insurance policy which has become unnecessary or unwanted. Life settlements are a relatively new part of the financial services universe but they represent a large market which is experiencing exponential growth. A policy which qualifies as a life settlement has a market value higher, often significantly higher, than the policy's cash value. Proceeds from a life settlement can be used during the insured's lifetime for business, personal or charitable purposes. Life settlements are generally an option for your clients over age 65 that have owned the policy for more than two years with a death benefit of $250,000 or more and: • Have a policy that is no longer needed or wanted • Have experienced a decline in health since policy issue • Have a policy that has not performed as expected • Have premium payments which are no longer affordable • Entered into a divorce settlement that alters the need for life insurance • Have a need to distribute funds while living (i.e. long-term costs) • Wish to gift the proceeds of a sale that results in a larger gift to a charity than the policy • Have business or personal circumstances that have changed |
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