RIA Recommends Retired Couple Sell $1 Million Policy in Order to Achieve Travel Spending Goals

 

For retired clients who are looking for creative ways to optimize the cash assets in their retirement portfolio, this success story illustrates the importance of working with a financial professional who has knowledge of the secondary market for life insurance.  
With the help of their Registered Investment Advisor, this retired couple was able to use the cash proceeds from selling an unwanted life insurance policy to achieve their travel spending goals without jeopardizing the financial legacy that they intended to leave behind for their family and their charity.

RIA Reviews Couple’s Portfolio and Recommends Life Settlement

With one adult child and three grandchildren, the retired couple’s primary goals were to support their grandchildren’s college education, as well as donate to their favorite charitable causes, including their alma mater. They wanted to travel more but also needed to make sure they did not outlive their money.

The couple requested that their RIA conduct a thorough analysis of their retirement assets and life insurance coverage. After taking into account the couples’ life expectancy and evaluating the balance in their retirement savings as well as their life insurance coverage, the advisor determined that the couple was well-positioned to meet their legacy planning objectives.
While the couple was satisfied to learn they were on course to achieve their primary goals, they asked the advisor to take a deeper dive to identify additional cash so they could travel more. 

The advisor noted that the couple owned three life insurance policies, one of which was no longer needed for estate planning purposes. Being mindful of his fiduciary duty to make recommendations that are in the best interests of his clients (SEC Reg. BI), the advisor suggested that the couple sell the $1 million policy and use the cash proceeds to travel. The couple was impressed with the advisor’s knowledge regarding the secondary market for life insurance and agreed it would be financially prudent to sell the policy.
Asset Life Settlements was asked to broker the transaction in pursuit of the highest possible offer.  We submitted the case to 13 funding sources and received multiple competing bids. The lowest bid came in at $85K and Asset Life Settlements continued to negotiate competing bids with buyers until the highest offer of $225K had been achieved and accepted by the insured.
The couple was truly grateful for their advisor’s recommendation and for our expertise in obtaining the highest possible offer.  Selling the policy provided them with the peace of mind that they could travel and enjoy the remainder of their golden years without jeopardizing their financial legacy.

Key Take-Aways

•  RIAs have an opportunity to expand their menu of advisory services by adding life settlements to their services.
•  In the age of “Best Interest” regulations, selling an unwanted policy to achieve retirement goals can often be the most prudent recommendation.
•  Asset Life Settlements has the secondary market expertise to negotiate the highest possible settlement for your client’s policy.

 

Call us at 1-855-768-9085 to explore your client’s eligibility for a life settlement or to request a free policy appraisal. 

 

Policy Owners Were Paid $848 Million for Selling Policies in 2020

 

According to The Life Settlements Report recently published by The Deal, last year 3,241 policy owners opted to sell their life insurance policies for cash payments totaling $848.1 million.

In spite of the logistical hurdles created last year by the pandemic involving in-person notarizations and other challenges, the life settlement market continued to grow and ended the year on a high note. The report published by The Deal noted that the secondary market increased by double digits in 2020 and the total amount of cash paid to policy sellers represented an increase over the previous year.

Industry insiders attributed the robust activity in the secondary market for life insurance to the fact that many more seniors over the age of 65 are discovering the transformative economic impact of selling an unwanted policy. While the average amount paid to sellers in 2020 hovered around 20% of the policy’s face value, some policy sellers received payments as high as 52.8% of the face amount, according to the report.

What Motivates Seniors to Sell Their Policies?

Many seniors have come to the conclusion that it makes economic sense to be free of annual premium payments by selling an unwanted policy for multiple times its cash surrender value. The cash proceeds from selling a dormant life insurance asset can be repurposed to pay for more immediate needs, such as long term care, medical expenses, or paying off debt. For some policy owners, being free of burdensome premium payments for coverage they no longer need is, in itself, a strong motivator.

According to a 2016 report published by A. M. Best Rating Services, Inc., seniors are selling their policies for the following reasons:

  1. Premiums paid by the policyholder have become unaffordable and the policy is in danger of lapsing
  2. Estate planning needs of the insured have changed
  3. Funds are needed for long-term health care
  4. Beneficiary has changed because of death or divorce
  5. Disposal of unneeded key man insurance or other business-owned insurance
  6. Fund new annuities, life insurance, or investments
  7. Satisfy the need for cash in a forced liquidation due to bankruptcy or financial difficulties
  8. Liquidate policies donated to not-for-profits
  9. Dispose of policies that are no longer needed or wanted for a variety of reasons

Regulatory Initiatives Play a Factor in Market’s Growth

As noted in our recent blog post titled “Life Settlement Market Experiences Growth while Consumer Best Interest Regulations Gain Ground,” the increased attention on consumer best interest regulations is causing some fiduciary (as well as non-fiduciary) professionals to consider the connection between life settlements and their duty to inform their clients of the option.

According to the Life Insurance Settlement Association ( LISA), life settlements are among the most comprehensively and strictly regulated financial transactions in most states today.

Today, approximately 90% of the U. S. population is afforded protection under comprehensive life settlement laws and regulations. Regulatory obligations and consumer protections include:

  1. Licensing and oversight of providers and brokers
  2. Fiduciary status for brokers
  3. DOI form approval
  4. Extensive consumer disclosure mandates (including disclosure of alternatives and of tax, legal, and other implications)
  5. Privacy protections
  6. Funding requirements
  7. Competency certification
  8. Beneficiary acknowledgement
  9. Reporting requirements
  10. Rescission periods

Future Growth of Life Settlement Market

According to a recent article published in Forbes, the aging U.S. population will likely expand the universe of potential insurance policies that could become life settlements. The Forbes article noted that by 2030, Americans age 65-plus will make up 21% of the population, up from about 16% in 2019, according to the U.S. Census.

Some life settlement professionals predict that rising inflation and any future tax increases could impact the financial stability of retirees and motivate them to sell unwanted policies for the extra cash.

Another reason for the market’s projected growth relates to the amount of institutional investment capital available to purchase policies. The secondary market for life insurance is an attractive investment due to the fact that it is an alternative asset class that offers non-correlated returns that are typically higher than those tied to the financial markets.

Key Take-Aways

The secondary market for life insurance continues to provide a safe and effective solution for seniors who feel chained to life insurance policies they no longer want or need. 

When the decision is made to sell a policy, obtaining the highest possible offer from institutional buyers requires the services of an experienced life settlement broker.  Asset Life Settlements has the credentials and secondary market expertise to negotiate the highest possible cash offer for a policy.

Call us at 1-855-768-9085 to discuss your questions or to request a free policy appraisal.