Life Settlements of New Jersey

Annual Enrollment Period for Medicare runs from Oct 15 to Dec 7. If you live in NJ, Contact me to review changes for next year
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Annual Enrollment Period for Medicare runs from Oct 15 to Dec 7. Contact me to review changes for next year
[email protected]

http://blog.lisainstitute.org/2015/02/25/lapsed-life-insurance-policies-an-astounding-number/

Lapsed Life Insurance Policies: An Astounding Number
Posted on February 25, 2015 by Darwin Bayston, CFA, President and CEO, LISA
The number and amount of lapsed life insurance policies by U.S. seniors over age 65 is astounding: more than 250,000 policies with a combined face value of more than $57 billion are lapsed and surrendered back to life carriers each year. The average face value of those policies is approximately $225,000.

And that only includes universal and variable life policies that most people think are best-suited for life settlements. If term life is added, which often includes policies that are also attractive for life settlements, and ordinary life policies, the total exceeds $112 billion.

Lapsed Life Insurance Policies: An Astounding Number
Lapsed Life Insurance Policies: An Astounding Number

These amounts are based on publicly available information as of 2010. The number and amount of face value of policies today is certainly greater.

John Welcom, founder and chief executive officer of Welcome Funds, presented this research earlier this week at LISA’s Fifth Annual Institutional Investor Conference in New York. Previous studies have provided estimates about the overall size of the life settlement market based on analyzing the total amount of life insurance inforce. This is the first work that is based on the number and face value of policies lapses and surrendered back to life carriers.

What makes the study relevant? It validates the need for a marketplace where seniors who have policies that are no longer needed or perhaps affordable can realize a value often many times greater than its cash surrender value. The study provides the foundation for LISA’s mission to educate American consumers and their financial advisors about an important option for potentially unlocking billions of dollars of hidden value in life policies that could provide valuable financial resources in retirement.

Think about it. Seniors who held more than 250,000 life insurance policies either unconsciously or knowingly allowed those policies to lapse. Billions of dollars of potential “real value” was surrendered back to life companies for no value.

Meanwhile, a survey by the Insurance Studies Institute reported that less than 50% of seniors are aware about the option to consider selling their life policy. Further, 90% of seniors who had lapsed a policy would have considered selling it if they had known a life settlement was an option.

Thanks to this new research, we now have a benchmark for the serious amount of financial value available to seniors over age 65 from the possible sale of their life insurance policies. Now more than ever, there is an enormous need to educate seniors and their advisors about the alternatives available to lapsing their life insurance policies.

LISA must take on the responsibility to provide this consumer education and to help foster a robust life settlement market.

Lapsed Life Insurance Policies: An Astounding Number The number and amount of lapsed life insurance policies by U.S. seniors over age 65 is astounding: more than 250,000 policies with a combined face value of more than $57 billion are lapsed and surr...

https://www.youtube.com/watch?v=m47pNrKkgf4&feature=youtu.be

Explaining Life Insurance Settlements A life settlement is the sale of a life insurance policy covering a person who has a limited life expectancy -- normally 10 years or less. It presents a uniq...

The underfunding crisis that is facing many life insurance policies that were originally written in the 1980’s and 90’s could be good candidates for a life settlement.

Financial advisers, attorneys and trustees are struggling with universal life insurance policies that were written years ago. What transpired was they were using optimistic assumptions for interest rates at a time when they were as high as 15%. UL policies provide a death benefit as well as a cash value account that credits interest that a client can use to fund a portion of the premium payments. The cost of insurance is then deducted from the cash value.

The high-interest-rate assumptions back then meant that the people who bought these policies didn't expect to pay a lot to cover the cost of the policy. They thought that the high credited rates of interest would help cover that expense.

However, in today's low interest rate environment, carriers are unable to credit interest at those high rates. Customers are now deciding whether they should pay more money to keep the policy in force, cut their death benefits or let the policy lapse altogether.
A financial solution to an underperforming policy is a life settlement transaction. That means selling the underfunded life insurance policy to an institutional investor.

The life settlement market allows investors to buy an unwanted life insurance policy from an insured person. The insured will receive a lump sum payment. The amount is less than the death benefit of the policy, and greater than the cash value. The investor becomes the new owner of the policy and is responsible for paying the premiums. The investor collects the death benefit when the insured person dies.

Life Settlement providers have indicated that there is a substantial increase in evaluation requests for universal life insurance policies. Insured’s with underfunded policies are looking for solutions.

Larry J. Rybka, chief executive of ValMark Securities Inc., a broker-dealer that also has a life settlement operation, says that they have 20 policies that are going to market this year, worth $65 million in face amount, up from 10 that were sold last year.

He noted that there likely are other factors into clients' renewed interest in selling unwanted policies. For instance, the estate tax exemption for couples is up to $10.5 million, meaning there are clients who bought policies in the past, believing they would need large amounts of coverage to address estate taxes.

“With interest rates down, these clients are pressed to maintain a lifestyle in retirement,” Mr. Rybka said. “With the specter of having to pay more premiums, they now want to give up the policy.”