Maximizing Value: A Life Settlement Success Story
John, a 68-year-old retiree in fair health, found himself at a crossroads with his $5 million term life insurance policy. The policy, originally taken out for a business deal that never materialized, was set to terminate in 3 years if not converted. With only one year left on the conversion option, John faced a difficult decision.
The Dilemma: John’s current situation was far from ideal:
– His monthly premium was $1,000
– If converted, the premium would skyrocket to $11,500 per month
– He had no beneficiaries after his spouse’s recent passing
– He had no children
– He was considering letting the policy lapse
The Life Settlement Solution:
Recognizing the potential value in John’s policy, I suggested exploring life settlements. This option opened up a new perspective on John’s “unwanted” policy.
The Process:
1. The policy details were submitted to a bidding process
2. Through reverse underwriting, the policy’s value was determined
3. An offer of $250,000 was made for the policy after conversion
4. John accepted the offer
5. Within 45 days, the policy was converted to permanent and sold
The Outcome:
John received $250,000 for a term policy that would have otherwise lapsed, without value. This case demonstrates the importance of viewing life insurance policies as assets with potential value, even when they seem to have outlived their original purpose.
Key Takeaways:
1. Life insurance policies are assets with potential value.
2. Reverse underwriting can unlock hidden value in policies.
3. Life settlements can be an attractive option for those aged 65 or older with policies worth $100,000 or more.
4. Both permanent (cash value) and convertible term policies may qualify for life settlements.
5. There are no commitments necessary to determine if your policy has value
This case study illustrates how life settlements can provide a financial lifeline to policyholders who no longer need or can afford their life insurance policies. It’s a prime example of how understanding the full range of options available can lead to significantly better financial outcomes.