Companies that Buy Life Insurance Policies
If you’re thinking about selling your life insurance policy in a life settlement, you may be looking for a list of companies that buy life insurance policies. As an owner of a policy this seems like a logical place to start, but the truth is, only a few investor groups are actually consumer facing, meaning they have a call center and staff designed to handle inquiries from the general public, which is both timely and expensive. Your best bet is to start with a life settlement broker who can bring your case to many companies that buy life insurance policies, and we can help you.
Technically you could go to an investor yourself and apply for offers, and you may receive one. The problem is, you won’t know if it’s a good offer or bad offer. It is always recommended to get more than one offer to at least make sure you’re not settling for a low-ball offer, and working with a broker is likely to get you significantly more than if you tried to get an offer yourself.
If you’re interested in finding out how much your policy is worth to an investor, take 30 seconds to fill out the Free Appraisal form on this page and we’ll get back with you promptly with some numbers to consider.
Most of the time investors get cases through wealth advisors, life insurance agents, and most importantly life settlement brokers. Brokers have the best understanding of how much your policy might be worth, how to approach the market, how to advise on your options, and how to close a settlement. Your general wealth advisor may know a little about life settlements but they rarely know more than the basics and may not even be allowed to work on them, and many life insurance agents are completely unaware of life settlements at all. If you go through them to do a settlement they may be working through a broker, or may only be sending your case to one or two investor groups, which is less than ideal. You want a broker to represent you to make sure your case is getting in front of a wide variety of investors and that you’re getting the most out of your policy in a settlement.
Life Settlement Option is a broker solution, and our job is to help you understand if your policy qualifies for a life settlement, and provide an initial valuation or appraisal. If your expectations are in line with this appraisal, then we can talk about the steps necessary to bring your case to market. There is no cost for an appraisal, and it’s free to test the market as well. Our job is also to bring your case to a wide variety of investors and create competition so that we find the most motivated buyer, at which point you can decide to accept or decline.
People who are looking for a list of companies that buy life insurance policies may be having a difficult time finding many. There are approximately 30 different investment groups, some representing large capital in the billions of dollars while some represent individual capital. If you went to each group individually you would have to fill out each one of their applications and go through their process and it might take months and lots of effort to shop your own policy, or if you work with a broker you can get multiple offers with one application. If you’re hoping to find a list of companies that buy life insurance policies you should instead be looking for a life settlement broker who has expertise in the marketplace, and should look no further. We’re a broker solution with great success and would be happy to help you get started with no obligation.
Every investment group has a different level of motivation on a certain type of case at any given time because it is in fact a marketplace. One group may be looking for smaller policies around $250k while others are looking for only $500k+. One group may have a lot of policies maturing soon and need to diversify their portfolio with longer life expectancies. One group may have some large offers out on other cases and can’t risk adding another, while another group may have lost a few deals recently and is hungry and able to make a strong offer on your case. This is why it’s so important to get multiple offers on your policy before accepting one.
As an example, in one particular case we might get an offer from one group for $100k, and another group offers $140k. The next group declines to make an offer, but the 4th group comes up with $200k. After some back and forth negotiations we eventually settle at $270k, but if you had only gone to that first group you may have been happy taking $100k. Was it worth it to work with a life settlement broker in this case? Absolutely. And there are plenty of other times where nearly every group declines to make an offer on a smaller case, but we eventually find that one group who will offer $12k. For someone who was just going to let their policy lapse they are very happy they got $12k instead of $0.
The life settlement industry really only started to gain much traction around the year 2000, and in the early days the industry was known for only buying policies $500k+ with life expectancies of 8 years or less, but a lot has changed since the early days, and more and more capital is coming into the marketplace every day from a wide range of resources. That is because life settlements are considered an alternative investment or non correlated investment meaning it is not tied to the stock market. The stock market can be up or down, it does not affect investments in life insurance policies. So any institutional investment company that is looking for diversification in their portfolio may be considering investing in life settlements. This is a multi billion dollar industry today, and continues to grow as the baby boomer population continues to age with more and more people wanting to do a settlement.
About 85% of universal life policies don’t end up paying out the death benefit, which means these policies are either lapsing or they’re being surrendered for the cash value. This is for a wide variety of reasons including policies under performing and insurance companies having to raise the cost of insurance. This means policyholders are having to pay more than they expected to keep these policies in force for as long as they intended and may not be able to afford it. Another issue with universal life policies is that they offer a lot of flexibility, which can be nice for certain reasons, but can also put policy owners in danger of lapsing. With an increasing cost of insurance with age, policy owners who have accumulated cash in their cash value account are able to use this money to pay some or all of their premiums. If they do this long enough they may find their cash value balance eventually runs out, and are now on the hook for a much larger premium than they were used to paying. Perhaps they’d been paying $10k a year, but now have to pay $50k. It can be that dramatic, and this is when people end up lapsing their policy. The life settlement market is here to help you recoup some if not all of your investment instead of losing everything, and our job as life settlement brokers is to help you win your best possible settlement.
Companies That Buy Term Life Insurance Policies
If you are looking for a list of companies that buy term life insurance policies, most investors will consider purchasing a term policy as long as it’s still convertible. The conversion privilege on the majority of term policies allows you to convert your term policy into a permanent policy such as a universal or whole life policy without having to go through underwriting again. So whatever health rating you received when you applied for your term policy, even if your health has declined since then it doesn’t matter. The insurance carrier will issue that new permanent policy on your life. This new, permanent policy is what investors are willing to buy if the pricing is advantageous from an investment perspective. The premiums might seem like a lot to an individual, but if an investor can crunch the numbers the right way it may end up being a profitable investment and they will make an offer.
If you have a term policy and you’re not sure if it’s convertible you can either review your original contract terms for the conversion deadline, or simply call your insurance carrier and ask if your policy is convertible. If it is, we can order an illustration.
Companies that buy existing life insurance policies are now legally required to do so through a life settlement provider. The life settlement provider acts as a legal entity that must hold a license in each state that they do business. They also represent the investor side in the negotiation process, and may be representing multiple investment groups at once. They will typically handle underwriting, offer creation, and negotiations. The fund must approve offer amounts, but ultimately the life settlement provider is looking to get a good deal for their investors. The life settlement provider is also in charge of contract origination that follows legal due diligence in order to protect both the seller of the policy and the buyer. They are protecting the buyer by way of ensuring that the investor will own the policy free and clear without obligation to divorce decrease, bankruptcies, and any other legal entanglements. Part of the seller’s duty on the contract is to have the insured, owner, and beneficiary sign off on the contract so that no one is caught by surprise when the policy is sold, and the seller is of sound mind.
If a seller wants their case reviewed by companies that buy existing life insurance policies, the best way to get their case in-market and have their best interests represented is by working with a life settlement broker. Similar to a real estate broker, a life settlement broker will communicate offers and negotiation points between the seller and the life settlement provider. It’s their job to uphold good, trustworthy relationships with investors so that they may continue doing business with a wide variety of investor groups on behalf of their clients. The majority of these groups are unable to handle the volume of consumer inquiries on their policies. Many contracts do not qualify, and oftentimes people’s expectations are unreasonable. The life settlement broker works with clients to determine if their policy qualifies, and takes the time to help them understand the marketplace, what data needs to be collected, and knows where to send your case to get multiple offers.
If you’re wondering how investors come up with offers for policies, the two main items they are trying to solve for is the future cost of premiums and the insured’s life expectancy. While it may sound odd determining how many years someone is likely to live, underwriters are simply using actuarial data and mortality tables to come up with this number. In some cases the insured will live longer than projected while in others they will live less, and the two scenarios balance each other out from an investment perspective when an investor manages hundreds or even thousands of policies.
If a 75 yr old has a $1MM universal life insurance policy that costs $40k a year in premiums, and the underwriter believes they are likely to live another 10 years, that means the investor knows right away that they will likely pay $400k in premiums before receiving any money back from this investment. $400k out of $1MM leaves a fair amount of margin to pay for a settlement upfront, but it’s not going to simply be the difference of $600k. In that scenario the investor would have paid $1MM over 10 years only to get $1MM back. That’s not a good investment. What’s more likely is they will offer $150k in a settlement. If you’re doing the math in your head, that means they would make $450k profit, which sounds like a lot, but you have to take into account the time value of money, and the difference in premiums you would have paid if you held onto the policy another 10 years. Once you factor in compounding interest they need to make each year to essentially loan out that money, after 10 years it adds up pretty quick.
If you held onto this policy, yes your loved ones would receive $1MM, but if you spent another $400k in premiums, really your total return on investment would be $600k (not taking into account the premiums paid to date). But most people only think of the $1MM, not how much it costs in premiums before it is paid.
So if you’re looking at a $150k settlement, and you add $400k that you would have paid on your premiums over 10 years, that $150k really turns into $550k, and that starts to look pretty good when you look at the big picture. If you put that money in a relatively safe investment, perhaps over 10 years it may have grown to significantly more, too. Perhaps this is a better investment for you than trying to hang onto that policy.
It’s hard to walk away from the face amount of a policy, but when premiums are stretching your budget and start to add up what you get plus the amount of money you would have spent on premiums, it might start to look like a pretty good deal.
Investors have large sums of money which they can afford to pay expensive premiums as long as they make a modest annual interest rate. For individuals, these expensive premiums often eat up their personal budget, and may be preventing them from doing the things they want to do. Perhaps they want to help their kids with a down payment on a home, or afford a vacation home their family can enjoy for generations to come.