Life settlement eligibility Requirements for Seniors
Life Settlement Eligibility Requirements
As the U. S. population continues to age, greater numbers of seniors are discovering life settlements. Smart baby boomers and their parents realize that monetizing the value of an unwanted life insurance policy is simply a prudent financial decision, especially when considering the alternative is lapsing or surrendering your policy.
But not all seniors are candidates for a life settlement. Here’s why:
The secondary market operates on the ROI investment model known as “longevity risk.” When calculating their pricing assumptions for the purchase of policies, institutional investors use actuarial data that determines the policy buyer’s longevity risk by taking into account medical advances in the treatment of serious illnesses. So the longer the life of the insured individual, the lower the investor’s return.
While the criteria for life settlements are primarily centered on the life expectancy of the insured, brokers generally use a checklist similar to the criteria below in the pre-screening and application intake process.
Age of the Insured (Life Expectancy)
The life expectancy of the policy owner is the primary determining factor. The shorter the life expectancy, the greater the chances that a secondary market buyer would purchase the policy. While seniors who are age 65 and over are generally considered to be eligible, the key factor is longevity. The shorter the life expectancy, the more attractive the policy is to secondary market buyer who will be responsible for paying the annual premiums for the policy until the insured passes away.
When we screen applicants for life settlements, we use the following qualification guidelines:
- 65 years of age or over with a life expectancy of 12 years or less
- Less than 65 years of age, but with a serious health issue an a life expectancy of 6 years or less
In short, the age, health and projected life expectancy of the policy owner are the most critical factors in determining eligibility for a life settlement
Face Value of the Policy
The institutional money sources (potential buyers) hold the cards when determining the size of policies they will purchase.
If the policy’s face value (death benefit) is less than $100,000, it may not attract much attention from prospective buyers. Based on data collected from industry reports, most life settlement providers prefer to purchase policies valued at $250,000 or above.
Type of Policy
Similar to how institutional investors establish the size of the death benefit they will purchase, the buyers also establish the guidelines for the types of policies they will purchase.
While various types of policies may qualify for a life settlement, Universal life policies and term policies (if convertible) are the most commonly purchased policies.
At Asset Life Settlements, we’ve helped policy owners sell the following types of policies:
- Universal Life
- Indexed Universal Life
- Variable Universal Life
- Term (if convertible)
- Survivorship (Second-to-Die) policies
Other Qualifying Factors
During the initial screening process, brokers also look for the following factors:
- Is the AM Best rating for the insurance carrier B+ or better?
- Are there loans on the policy?
- Does the policy have a cash surrender value of less than 25 percent of the death benefit?
- Does the policy have a shadow account with value?
Ask us for a complimentary pricing analysis
If you are interested in learning whether you qualify for a life settlement, contact us at 888-335-4769. We’ll provide you with an immediate pricing analysis. There is no cost or obligation to you.