Terry Bork CLU ChFC, President   |   Aurum Insurance Services   |   D: 440-605-7230   |   C: 440-666-6032   |   tbork@auruminsurance.com   |   www.auruminsurance.com

Life Settlements

Life insurance is an asset that requires the same consideration and review as all other assets.  Like other assets, it can be sold through a Life Settlement

What is a Life Settlement?

A life settlement is the sale by the owner of a life insurance policy to a third party, for an amount greater than its cash surrender value, and less than the death benefit.  The seller of the policy receives a cash payment.  The buyer of the policy assumes all future premiums payments, and receives the death benefit upon the passing of the insured.

There are numerous reasons to consider selling a life policy:

  • The premiums are no longer affordable
  • The need to replace lost income in case of death of the insured no longer exists
  • The need for funds to pay estate taxes no longer applies
  • There is a need for resources to pay for health expenses and long term care
  • A term policy may be reaching the end of the coverage period
  • Funds are wanted to improve your retirement lifestyle

Do you Qualify?

In general, the following qualification criteria apply:

Age and health status of insured:  Insured who is age 65 years or older.  Younger insureds may qualify, depending on certain medical conditions.

Type of insurance policy:  The majority of policies sold in the secondary market for life insurance are universal life insurance policies.

The life insurance policy premiums:  The amount of the premium payments to keep the policy in-force will also play a role on the offer amount.

Life insurance policy death benefit (face value):  Life insurance policies with death benefits of more than $100,000 are most desirable.  However, some smaller policies can be sold.

How much will you receive?

The amount you receive will depend on:

The death benefit/value of the policy – amount investor receives at the death of the insured

The annual premiums – the amount of premiums that will be paid until the insured dies

The number of years premiums will need to be paid – the remaining expected life of the insured

The rate of return the buyer of the policy requires to make the investment

The amount received from selling a policy will always be greater than the cash surrender value and less than the death benefit value

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