Life Settlements For Boomers Are Rare, But...

Leibowitz predicts the maximum expectancies will top off at 22 -25 years.

Still, many boomers do call to inquire about settlements, Edelston notes.

In most cases, those calls are about settling policies for their parents, he says. "They ask about selling policies the parent doesn't need any more–say, a policy the parent bought many years ago as an inheritance for the kids" who are now grown.

This part of the market makes a lot more sense than settlements for boomers' own policies, Edelston contends.

"We get calls from boomers from all over–Hawaii, Hungary, Panama, and so on. Our response is to be sure the callers are as educated as possible about life settlements. And we tell them up front, what we can and can't accomplish for them."

But some boomers do call about their own policies, or they inquire about settling their own policies after first discussing their parents' policies, Edelston adds. In most of these cases, "we tell them, 'a market is not available for that. We don't have a buyer for this policy," he says.

The exception would be, as indicated earlier, a boomer with serious health problems.

Most consumers are still "very unaware" of options outside of surrendering or lapsing their unwanted or no-longer-needed policies, observes Coben.

That applies to boomers, too, he says.

"But as they become aware, the boomers are intrigued–because life settlements are about gaining control, looking at your policy as an asset you can control."

This is especially so if they have had a financial or medical change in their life and need to cut back or need to get cheaper coverage, Coben says.

That fits in with the predisposition that many boomers are said to have, of wanting to (or having to) take control of their financial lives and futures, he indicates.

As the settlement market matures, more boomers, and the public in general, will understand the applications for settlements, Coben predicts. But for that to happen, he says the industry needs to focus on educating consumers, and not just financial advisors, about settlements.

This education should be directed toward the public in general, not necessarily boomers, he adds. "That way, it will drift down to the boomers."

Coben sees the word spreading this way: "The top of the front edge of the boomers will find it appealing, when they learn about it. Then, a few years later, if they need to make a change in their life insurance, they will already be informed about it."

Knowing they can settle their policies later on makes life insurance more valuable to them right now, he adds. "They know they can buy it in their mid-50s and then, down the road, the insurance will have residual value beyond the surrender value. It's an exit strategy for them."

Advisors need to be honest up front with boomers who are interested in life settlements, Edelston cautions. They need to know that the market for them is very slim right now. And, most importantly, they need to know that settlements are for policies that the owners no longer want or need.

When they ask, he says he usually inquires if they have other ways to meet their liquidity need. For instance, if the life expectancy is under 2 years, he may ask: "Do you have an accelerated death benefit in this policy?"

Usually, he finds that it is not in the boomer's best interest to sell a policy for a fraction of the ultimate death proceeds–which would happen on settlements where longer life expectancies exist.

So, he educates the client on available options. He pursues a settlement only if it proves to be the best possible option.