Sell Now or Sell Later: Life Settlement Decisions

Additionally, the mortality tables used by life settlement actuaries have shown steady increases in life expectancy. While the more general population mortality tables have decreased most recently as a result of the opioid crisis, the mortality tables used for life settlement population have not. So by waiting, an insured may become subject to a life expectancy increase based on a revision to the life settlement mortality tables; although the reverse is possible, it would be bucking the trend.

If the insured decides to postpone the decision and their health declines while waiting, and their life expectancy decreases meaningfully, they might receive a much larger offer. Waiting allows the policy owner to assess things at a future time. They may speculate on a possible decline in health which would make the policy worth more or, if that occurs, even more attractive to keep it rather than to sell. But note, however, there may well be a cost for the delay.

If the decision is to wait, be sure not to allow the policy to go into the grace period or lapse. A life settlement transaction can take up to three months or more to complete. Investors don't buy policies in the grace period or policies that have been reinstated within two years as that starts a new contestable period. Careful monitoring is required.

Finally, another major factor in life settlement pricing is the condition of the life settlement market as a whole. A change in investors' target rates of return can substantially increase or decrease a life settlement offer.

When it comes to health and to market conditions, no one has a crystal ball. Yes, holding on to a policy longer does give the owner more time to make a decision and possibly speculate or reconsider based on an adverse change in health or market influences; however, the decision to wait frequently does come at a price.

The bottom line is that it is important to understand that there is no free ride when waiting. The decline in cash surrender values or possibly additional premiums that might have to be paid to keep the policy going are real considerations. If the prime objective is to maximize cash from the policy, quite likely the best approach is to sell as soon as the decision is made that the policy is no longer wanted, needed or affordable.

As situations come up, you just might have one more opportunity to do something good for your clients.

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Robin S. Weinberger, CLU, ChFC, CLTC, is the director of national accounts for Life Insurance Settlements Inc. She has been a general agent and director of national accounts for Connecticut Mutual and vice president of marketing for Sun Life of Canada. She can be reached at [email protected] or (617) 451-3343.

Peter N. Katz, JD, CLU, ChFC, RICP, is a life settlement broker and co-director of national accounts with Life Insurance Settlements Inc. He is also a consultant specializing in life insurance advanced sales illustrations, and he has served as an advanced markets attorney and in product development. He can be reached at [email protected] or (860) 937-2936.