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The Life Settlement Advisor
October 2011 |
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| This Month's Message |
 Insurance Optimized
Life insurance has long been a valuable estate planning tool. However, the cost of maintaining insurance for older, affluent individuals presents significant challenges. Underperforming policies, due to low interest rates, combined with longer life expectancies, often put the annual premium outlay beyond what a policyowner chooses to maintain.
Still, the need for adequate coverage remains. Prior to the secondary market for life insurance, few options existed for consumers seeking to retain life insurance while eliminating premium payments. Nonforfeiture laws provide for surrender of the policy back to the life insurer for cash or exchange by the issuer for a reduced paid-up benefit. Because both options are based on a value determined by the issuing life insurer, they frequently undervalue the policyowner's asset. The introduction of the secondary market enables policyowners to benefit from the market value of the original policy, providing more value than a traditional exchange based on the cash surrender value.
Ideal Candidates
To qualify for a life settlement, clients must be age 60 or older with:
- A life insurance policy with $1,000,000 minimum face amount
- A life expectancy of 20 years or less
Common scenarios include any number of situations in which a policyowner wishes to eliminate premium payments while still retaining life insurance, such as:
- Reduction in the value of an estate or business
- Existing insurance is performing below expectations
- Retirement or sale of business
- Change in marital status
- Client gifts for premiums are now subject to gift tax
Another easy way to determine if someone qualifies for a life settlement is to utilize Life Settlement Advisors' Qualification Calculator.
I would be happy to answer any questions you may have about this or any other life settlement topic. I can be reached at 888-849-0887 or llagrotte@lsa-llc.com.
Leo LaGrotte
October 18, 2011 |
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| Quick Links |
Get answers to the most Asked Questions
Click here to determine if you or your client's life insurance policy qualifies for a Life Settlement |
| Factoid | |
The USA was downgraded by S&P on 8/05/11 from a top rating of AAA to AA+.
In the last 30 years, 5 other countries received a similar downgrade from S&P but ultimately were able to regain a top AAA rating.
(source: S&P) |
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Latest News | |
Fasano Releases 99% Actual to Expected Ratio for 2005 - 2010
Marketwatch, September 29, 2011
Fasano Associates has just released the latest independent actuarial analysis of its Actual to Expected (A to E) performance, including an Actual to Expected Ratio of 99% for the 2005 through 2010 time period, based on the actual life expectancy estimates given to its clients. Continue...
Internal Revenue Service Reaffirms its Position on Life Settlements
MarketWire, October, 2011
In response to a recent letter asking for clarification on Tax Ruling IRS 2009-14 the Internal Revenue Service (IRS) has reaffirmed its position on the tax treatment of Life Settlements. More...
Life Settlements Market Remains Unsettled
Insurance Networking News, October 5, 2011
As investors warmed to the life settlement industry over the past decade, the growth presented both opportunity and risk to the life insurance industry.
A new report from Conning Research & Consulting, "Life Settlements: An Asset Class Resets 2011," examines the current state of the life settlement industry and says the factors underlying the rapid growth that occurred during the middle of the past decade are likely not sustainable and, from an underwriting perspective, not desirable. Read more... |
| Company Announcement | |
Life Settlement Advisors has lined up a buyer that is interested in purchasing small-face life insurance policies in the range of $100K - $1M.
For more information, call Leo LaGrotte at 888-849-0887 or e-mail at llagrotte@lsa-llc.com. |
Question of the Month
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An estate planning attorney in Seattle, WA asks, "Can my client sell a portion of their policy in the secondary market and retain a portion of the death benefit as well?"
Answer: Yes, there are a limited number of buyers that will buy your policy and allow you to retain a portion of the death benefit with no future payments required. See the below two case studies. |
| Case Studies | |
Case Study #1
Insured: Male, Age 73
Policy: Universal Life
Face Amount: $5,000,000
Cash Value: $272,000
In addition to providing the policyowners with $272,000 for their policy, a life settlement provider enabled them to maintain a $1.7 million death benefit with no future premium obligations.
The policy was originally purchased by two siblings as part of their father's estate plan. The estate had since lost value, reducing the need for the current level of life insurance. After obtaining a life settlement offer of approximately $910,000, their advisor suggested SWAPP as an alternative. A life settlement provider purchased the policy for $272,000 and the policyowners retained a $1.7 million death benefit with no future premium obligations.
Case Study #2
Insured: Male, Age 66
Policy: Universal Life
Face Amount: $1,000,000
Cash Value: $37,677
A life settlement provider supplied the policyowner with $250,000 in death benefit with no future premium obligations.
The policyowner, a retirement-aged CPA, was seeking reduced premium payments while maintaining an adequate level of life insurance. Due to a change in health, the cost of new insurance was high, so his advisor recommended a policy valuation. The market value of the policy was significantly more than the cash value, which enabled the policyowner to pursue a SWAPP. A provider supplied the policyowner with $250,000 in death benefit with no future premium obligations. This allowed the policyowner to redirect his premium allocation to the acquisition of a second policy which, together with his $250,000 in death benefit, provided him the life insurance he needed within his budget.
Click here for more case studies.
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