Senior Life Settlement Opportunities In The Corporate Arena

The senior life settlement industry is largely focused on the individual life insurance market. However, there are increasing opportunities for corporations to look at senior life settlements to maximize the value of a significant corporate asset. The article below by David Friedman, JD and LUCTF, outlines where these opportunities lie.

Overlooked Settlement Opportunities In The Corporate Arena

Timing is everything. While many assets tend to appreciate over time, it may not always be viable to hold on to an asset until maturation. Insurance policies with rising premiums can often put their owners between a rock and a hard place, especially if their financial needs or obligations have changed. People often ask, "Is it better to continue financing a policy that you have already paid into in hopes of a gain at maturation or to recoup some of the investment by trading it in for its cash-surrender value?"

Corporate policy owners often face additional dilemmas when dealing with departing executives possessing key man or split dollar policies or insurance purchased as part of a buy-sell agreement. With more frequent activity in the corporate arena, such as mergers, acquisitions, bankruptcies, and top executives changing jobs, it is becoming ever more important for companies to realize the hidden value of life insurance policies.

 A life settlement transaction can give the original policyholder a lump sum payment greater than the cash-surrender value in exchange for the ownership of the policy. When a life settlement transaction is performed, the amount paid to the policy seller is derived from the face value of the policy and its cash-surrender value. However, the final amount depends on many other factors, such as the insured's health and age and the current cost of the policy's premiums.

In a survey of financial service advisors carried out by Maple Life Financial, nearly half of respondents had clients who had surrendered a life insurance policy, many of whom could have qualified for a more profitable life settlement transaction. The client missed out on this option and the advisor failed to reap the benefits of referring and servicing the transaction. Considering the fact that cash-surrender values average just 4% of policy face values and life settlement payouts can be over 5,000% of these surrender values, the decision to offer life settlements will present a very attractive option to clients who are unaware of the additional gain from these hidden assets.

The primary reason to be well versed in the life settlement field is that it is a unique business opportunity that will set you apart. Kit Carson, a life settlement broker in Reno, Nevada says that offering life settlements will give your firm a competitive edge and exclusive selling point and allow you to benefit from the additional revenue.

Another reason is the fiduciary responsibility that is owed to clients. When providing financial advice and strategic information to customers, being able to identify a way to turn an unneeded policy into a profitable asset can be extremely helpful. Finally, marketing and promoting this service in the business sector can be easy, since the majority of producers and advisors have clients that already fit the life settlement eligibility profile.

Ron Ritter, of Living Life Insurance Services in Oceanside, California explains, "Corporate owned life insurance policies are an oft-ignored source of potential revenue for clients and they provide additional opportunities for financial planners and advisors to increase their business traffic as well. Take, for example, a client possessing the remaining policy from a buy-sell agreement after the other parties have passed away. The life settlement option allows them to earn cash for the policy, which they can use to buy a more suitable insurance policy or perhaps invest back into the business." Ron also reminds us that in these circumstances, the advisor not only fulfills their fiduciary responsibility to provide their client with worthwhile options, but also sees increased customer satisfaction.

Consider the scenario of a fictional company that has purchased a combined $6 million in key man life insurance policies for its CEO. After years of employment, the CEO left to pursue other interests with a new company. Though the company holding the policies could wait for the full death benefit, its annual payments were extremely expensive, so a life settlement option was considered. The insured (former CEO) was 81 years old and the cash values on the policies were a combined $109,500. The company (the policyholder in this case) was able to conduct a life settlement with a provider and received $1.2 million for the policies or 1,096% of the cash-surrender values.

Corporate owned life insurance policies are rarely seen as potential opportunities for life settlement transactions. Discovering the flexibility and profitability of these opportunities can help you provide an optimal alternative to clients with financially burdensome or lapsing policies. 


 & T Financial has expertise in senior life settlements in California, including San Diego, Irvine, Santa Ana, Long Beach, Riverside, Los Angeles, Santa Barbara,Bakersfield, Fresno, Modesto, Sacramento, Stockton, San Francisco, San Jose, Oakland and Redding, Anaheim, Chula Vista, Fremont, Irvine, Glendale, San Bernardino, Huntington Beach, Oxnard, Fontane, Moreno Valley, Oceanside, Rancho Cucamonga, Santa Clarita, Garden Grove, Ontario, Pomona, Santa Rosa, Salinas, Palmdale, Hayward, Pasadena, Torrance, Corona, Lancaster, Escondido, Orange, Elk Grove, Sunnyvale, Fullerton, Thousand Oaks, El Monte, Simi Valley, Concord, Visalia, Vallejo, Inglewood and Santa Clara geographic markets