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Life Settlements

A Life Settlement allows seniors to receive cash in return for their life insurance
policy.

Almost any type of life insurance policy can be sold. (Term, Whole Life or UL).

A secondary market has emerged and “cashing in” your life insurance policy
back to the original issuing company is now not the only show in town anymore.
Lapsing a term policy is NOT the only option now when a policy is no longer
wanted. Get a “Policy Evaluation” and let’s see what large institutional
investment companies will offer for that policy.

Often, you can take an older policy not performing up to the expectations of the
policyholder and use the settlement money to purchase a new paid up lifetime
guaranteed premium policy.

When to consider a Life Settlement?

· When the insured is 65 years of age or older
· When a policy is lapsing or being surrendered
· The policy is no longer needed or wanted
· Premium payments have become unaffordable
· When there is a need for new life insurance.
· To pay for healthcare costs
· Change in estate planning needs
· When the insured has outlived the beneficiaries
· When there is a change in the health status of the insured.
· When the Client may have outlived the risk insured against
· Spouse has passed away
· Business partnership has dissolved
· Key employee has retired after a long career

Ideal candidates for life settlements

Clients age 65 and over with:
A life insurance policy with a face amount of at least $250,000 (can go down to
$25,000)

A adverse change in health since the original life insurance policy was issued
Life expectancy of 15 years or less.

Do your clients know the fair market value of their life insurance
policies?

In a recent case, a 75 year-old man had a $4 million policy that was not
performing up to expectations. His insurance agent recommended that the policy
be appraised. The market value of his policy was $755,000, that was over four
times its cash surrender value. The client decided to sell the policy and use the
proceeds to fund new, more cost-efficient insurance. The new policy had a face
value of $4.3 million and significantly lower ongoing premiums.

A study published by Conning and Company, an insurance investment and
research firm, found that more than 20% of the policies on insureds age 65 and
over have a fair market value in excess of their cash surrender value.

In other cases, investment projections may have proven unduly optimistic in the
current low-interest environment. So-called “vanishing” premiums have not
vanished, and the financial plan built around the policy is not being met. In any
such case, the owner may want out of his policy, either to move the value into
another asset or to buy a more efficient insurance policy.

Tax Implications

The sale of a life insurance policy may be a taxable event. Tax experts disagree
on the details of taxation, but there is a general consensus that if the cash
surrender value of the policy exceeds the premiums paid on it, the life settlement
proceeds will be taxed as follows:

· The portion up to the policyowner’s investment in the contract will be
received tax free.
· The portion exceeding the investment in the contract, but not exceeding
the cash surrender value, will be taxed as ordinary income.
· The portion exceeding the cash surrender value will be a gain, which in
some circumstances may be a capital gain.

Where the cash surrender value of the policy is less than the investment in the
contract, the IRS may take the position that only the cash surrender value
represents a tax-free return of basis — and everything else is gain on the sale of
the asset. This instance is not universally accepted, and Best Agency USA does
not give tax advice, so professional advice on any particular fact situation is in
order.

How do you get started?

The life settlement process begins your client filling out a Best Agency valuation
Application that determines the market value of a life insurance policy. Here is
how the process works:

· A completed Life Settlement Valuation Application and authorization is
submitted to Best Agency USA along with carrier illustrations and medical
records for the last five years.
· Best Agency USA values the policy to determine if an offer can be made.
· Best Agency USA relays the offer to the insurance agent.
· Once an offer is accepted, Best Agency USA provides closing documents.
· After receiving the executed closing documents, change of ownership and
beneficiary forms are sent to the life insurance company.
· Upon confirmation of the change forms being processed, funds are
released to the policyowner.

The Secondary Market for Life Insurance – How Insurance
Agents Benefit

Agents can earn additional income by facilitating the sale of his client's policy to
the Life Settlement firm.

Agents can earn income by recommending the purchase of additional life
insurance made possible by funds from the sale of the original policy.

Case Examples:

67 Year Old Male
$10,000,000 UL
Premiums $342,000/annual
Cash Surrender $48,617
Settlement $653,000

75 Year Old Female
$400,000 (Conversion)
Premiums $3600/annual
Cash Surrender $0
Settlement $38,500

82 Year Old Female
$2,000,000 UL
Premiums $68,000/annual
Cash Surrender $13,000
Settlement $800,000

79 Year Old Female
$3,000,000 UL
Premiums $96,000
Cash Surrender $403,617
Settlement $700,000

80 Year Old Female
$1,000,000 UL
Premiums $12,000
Cash Surrender $6,000
Settlement $270,000

79 Male/ 77 Female
$3,000,000 Joint
Premiums $25,500
Cash Surrender $15,424
Settlement $285,000

75 Year Old Male
$15,000,000 UL
67 Year Old Female
$10,000,000 (Conversion)
Premiums $672,000
Cash Surrender $620,000
Settlement $2,100,000
Premiums $190,000
Cash Surrender $0
Settlement $2,300,000

Additional Case Studies

Case History 1
Client: 88 year old male & 84 year old female, good health.
Result: $2,100,000 joint survivorship policy with no cash value. The policy was
no longer required and was going to lapse. Insured sold the policy and
received $600,000.00.

Case History 2
Client: 72 year old male with health complications.
Result: $1,000,000.00 UL policy with small cash value. Insured sold the policy
and received $180,000.

Case History 3
Client: 83-year-old female in relatively poor health.
Result: $4,000,000.00 policy with an annual premium of $168,000.00 which was
no longer affordable. Insured received $1,360,000.00.

Case History 4
Client: 76-year-old male with minor health problems.
Result: $1,700,000 policy about to lapse. The owner could not afford to keep
the policy in force and received $275,000.

Case History 5
Client: 81-year-old male in relatively good health.
Result: $260,000.00 policy with an annual premium of $10,300.00. Insured sold
the policy for $83,200.00.

Case History 6
Client: 78-year-old female in relatively good health.
Result: $1,000,000.00 policy with an annual premium of $84,000.00. Insured
sold the policy for $160,000.00.

Case History 7
Client: 76-year-old female in relatively poor health.
Result: $2,000,000.00 UL policy with an annual premium of $110,000.00.
Insured sold the policy for $325,000.00.


Questions? Call Best Agency USA at 1-800-999-BEST (2378)