Life Settlements Redefine the Potential of Life Insurance Policies
In the late 1980s, the AIDs epidemic gave birth to the viatical market, in which a terminally ill patient would sell their life insurance policy to a viatical firm for more than the cash surrender value. As AIDS patients began living longer, this practice eventually evolved into the Life Settlement industry. Today retirement age citizens with impaired but not critical health problems are offering their life insurance policies on the secondary market, selling to third party beneficiaries for more than the cash surrender value.
Today the size of this market continues to grow. Companies like MP Hanley and Associates market policies to a qualified institutional investor, several in fact, in order to secure the best deal for their client. The reasons for selling a life insurance policy vary from case to case. Perhaps a client feels they no longer need the policy. Their children may be grown up and gone, their estate taxation rate may have gone up, or their spouse may have died. Perhaps their premium is too high. Or maybe they just want the money to live out their remaining years comfortably. Whatever the reason, often times the opportunity to cash in for several times the cash surrender value is too much of an opportunity to pass up. So who qualifies for such an opportunity, and why?
The life settlement market is, as one might imagine, geared toward retirement age policy holders. One can qualify simply by being over the age of 65, having a policy worth over $250,000, and having a life expectancy of 2 to18 years. Life expectancy will be determined by an actuarial firm working on behalf of the potential investor. In fact the investor will do all kinds of due diligence in order to make sure a policy offers maximum financial potential in the future. Future premiums will be paid by the settling firm, who will then cash in the policy at the time of the former owner’s death.
The life settlement market has made a life insurance policy one of the most valuable and viable personal assets a person can have today. Circumstances change, and as they do more and more people are warming to the idea of a life settlement as a way to address current circumstances or set themselves up for the remaining years of their lives. Whatever the reason, the option is now there. In this way alone times, and the life insurance industry itself, have evolved.
Contributed by MP Hanley and Associates
www.mphanley.com
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