1. A life settlement is simply the sale of an existing
life insurance policy, of someone age 65 or
above, on the secondary market for more than
its cash surrender value.
What is a life settlement?
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2. The United States Supreme Court case of
Grigsby v. Russell, 222 U.S. 149 (1911) established
a Life Insurance policy as private property,
which may be assigned at the will of the owner.
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4. Term Policies
95% Do not end
up in death
benefits getting
paid.
Benefits
Received
No Benefits
Paid
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5. National Underwriter Confirms…
According to the National
Underwriters Magazine in
September 2004:
Majority of policyholders
let their policy lapse.
Or surrender the policy
for minimal cash value.
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6. In 2010, approximately $972 billion dollars worth
of life insurance death benefits lapsed in the US,
and of that number a significant amount
belonging to seniors – that is an extraordinary
amount of missed opportunities.
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7. 7
LIFE SETTLEMENT: RISKS TO
SENIORS
SUMMARY OF
COMMITTEE INVESTIGATION
MAJORITY STAFF
SENATOR HERB KOHL, CHAIRMAN
APRIL 29,2009
On April 29, 2009, the United
States Special Committee on
Aging conducted a study and
came to the conclusion that Life
Settlements, on average, yield 8x
more than the cash surrender
value offered by Life Insurance
companies.
8. 8
Cash Surrender Value vs. Life Settlement Payout
The reason is simple as to why you should understand what the true market value of your policy
is worth. If you are accepting the cash surrender value (CSV) on your life policy without
considering the market value, you may be leaving money on the table.
** These columns illustrate several actual cases. There is no
set percentage of face amount paid. Criteria such as premium
amount, type of policy, age, health, and life expectancy of the
insured affect the settlement offer.
11. A thriving and growing market
87 billion in face amount settled in 2011
Estimated to potentially grow to 151 billion settled in
2020
Life Settlement: A Growing Market
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12. Conning Research & Consulting has been working
with insurers for more than 50 years. They offer
many insurance industry research and information
services. Conning Research & Consulting is a leading
global third-party insurance asset manager with
offices in Hartford, New York, London and Dublin
Conning Research and Consulting,
Inc.
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13. “The corresponding market size is significant; the
market in unwanted life insurance policies was valued at
$16 billion in 2008. Further, the Life Settlements Market
was projected to grow to between $90 billion and $140
billion by 2016 from a baseline of $12 billion in 2007,
according to a report by Conning Research.”
Conning Research and Consulting, Inc (2007), Life Settlement Market,
Increasing Investor and Capital Demand, Conning Research and Consulting,
Inc Strategic Study Series.
Source: Conning Research &
Consulting, Inc.
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14. Why do you need us?
Why not do this on your own?
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15. Licensed as a life settlement broker?
We have almost 20 years experience with life settlements.
What constitutes a policy that is viable for a life settlement? Do you know?
What is the due diligence?
What is the fee agreement?
What about medical reviews?
Are the medical review companies acceptable to the purchaser of the life settlement?
Do you have the time to keep up to date with changes in the industry?
What about acceptance of the offer? Closing documents?
Who is buying the policy? Do you have sources of money already ready to go in order
to purchase your policies?
THIS IS WHAT WE DO
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You have a choice, do life settlements
on your own or with an experienced team
16. 72-year-old male, $1.8 million dollar universal policy
81-year-old female, $1.5 million dollar universal policy
73-year-old male, $3 million dollar universal policy
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Examples of Paid Up Benefit Transactions
17. A 72-year-old male held a $1.8 million dollar universal policy in trust. The policy
had been taken out in 1992 by the family for estate planning purposes. To
benefit his children. Due to the low interest rate environment over the last
several years, the $13,600 annual premium was no longer keeping the policy in
good standing and the cash value was eroding quickly. Over the years they have
contributed a total of $245,000 in annual premiums, so the family was shocked
to see the last annual statement reflects a cash value of only $23,600. Realizing
they would need to substantially increase annual contributions they needed a
solution. The family wanted to retain some coverage but was not financially able
to gift additional money to the trust. They were very pleased that a paid up
benefit transaction enabled them to retain $300,000 of coverage with no future
premium payments.
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Examples of Paid Up Benefit Transactions
18. An insured female age 81 had a universal life policy with a face amount of $1.5
million and a cash value of $116,400. A paid up benefit transaction made it
possible for the policy owner to retain $500,000 in death benefits with no future
premium obligation. In 2008 the insured’s daughter purchased 2 identical $1.5
million dollar policies in preparation for her mother’s estate tax liability. After
several years the mothers projected tax liability changed. The family had a
concern over the premium payment and a need for a reduced amount of
insurance coverage. A cash offer was received of $250,000 but the family
declined the offer and kept both policies. One of our funding sources suggested
a paid up benefit transaction. This allowed the family to retain $500,000 in death
benefits without future premium obligation. Combined with the other policy this
gave her a total of $2 million in coverage while reducing the overall premium
outlay.
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Examples of Paid Up Benefit Transactions
19. A 73 year old male with a $3 million universal policy with $0 cash value. The
policy owner retained a decreasing death benefit beginning at $2.1 million with
no future premium obligation by receiving a paid up benefit transaction. In 1997
the insured purchased 3 $1 million dollar term policies through a trust to help
transfer ownership of the family business to his children. After several years he
asked his advisor to explore the life settlement option but decided to continue
funding the policies as he had experienced a change in health. As the conversion
deadline for the policies approached, he contacted his advisor again. His advisor
understood the policy owner’s discomfort with the increasing premiums but
wanted them to maintain some coverage. A policy valuation yielded a cash offer
of $200,000 per policy. They considered selling 1 or 2 to help fund and remaining
premiums. Then they considered a paid up benefit transactions allowing them to
maximize the death benefit without premium obligations. Based on the
insured’s health and need for insurance a decreasing benefit option was a good
fit. The policy owner retained coverage with no future premium obligation
beginning at $2.1 million for the first 5 years, $1.3 million for the following 5 years
and continuing at $1 million thereafter.
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Examples of Paid Up Benefit Transactions
20. 75-year-old male, $1 million dollar universal policy
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Example of Cash Transaction
21. As circumstances change so do our financial goals. Shortly after
the passing of his wife, a 75-year-old man with a $1,000,000
universal life policy was discussing his finances with his advisor.
The advisor suggested he consider a life settlement transaction
as he no longer had a need for the policy. The policy did not
have any cash value. Our manger was able to solicit multiple
bids from institutional funders. The client accepted a high offer
of $150,000 for the policy. Upon receipt of the payout, the seller
placed a majority of his proceeds into his granddaughters
college fund.
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Example of Cash Transaction
22. A premier licensed life settlement broker.
Principles have over 25 years combined
experience in life insurance and life
settlements.
Our Team
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