As the secondary market for life insurance policies continues to evolve, the companies conducting the transactions are continuously looking for fertile new ground to cover, and for new ways to attract advisors and encourage them to include life settlements among their offerings.
Failing to find enough cases to keep an advisor's interest can be a problem for the secondary market. Cameron Dressander, of Dressander and Associates Inc., Naperville, Ill., was in just such a situation.
The firm "has been approached many times" about life settlements, he said during a July 2008 webinar sponsored by his firm, but he was "never interested that much" due to the relative scarcity of cases, which have traditionally been focused on older seniors.
"Cases that are out there are not that frequent," he said.
Perhaps the most attractive market for virtually anyone in financial services has been the baby boom generation, which has just started reaching retirement age. Yet that generation has been out of reach for more traditional life settlements, which typically look for insureds roughly 70 years of age or older. But now, a focus on that market has started to develop.
"Early life settlements," according to Ralph Russell of Trinity Life Settlements, LLC, Downers Grove, Ill., are focused on bringing term policies held by insureds as young as 55 to the settlement market after converting the policies to universal life policies.
These policies have not made a huge splash on the secondary market up to now, he noted, due mainly to the longer life expectancy for the insured. The offer is intended for those term policies that can be converted to universal life, Russell said, adding "most of those policies have conversion privileges."
The transactions can be a boon for both insured and advisor, he contended, explaining that they turn a no longer needed term policy with zero cash value into thousands of dollars.
Agents are typically paid for the conversion, he said, and clients will generally receive "a majority, if not all" of what they paid in premiums over the years for their term policy. Additionally, the target premium is split between the firm and the advisor.
"You'll be surprised," Russell said of advisors who speak to their clients about settlements, "how few of them even know that their term policy has secondary market value."
