Life insurance has a time-honored history of providing financial solutions to meet clients’ family and business needs. Yet these needs can, and do, change over the years, making a life insurance policy potentially unwanted or unneeded by its owner.

The loss of a loved one, dissolution of an estate or business venture, divorce, or other financial hardship can make keeping a current policy undesirable. Perhaps a key executive retires, a business is sold, an estate gets smaller, a loan is repaid, or the policy is simply underperforming expectations.

These are just some of the reasons why you will want to understand and explore the huge, relatively untapped market created by aging Americans who find themselves burdened with unneeded or unwanted life insurance policies. These may be the ideal clients for a life settlement solution.

"In March 2005, we estimated the life settlement market could grow from an in force of $13 billion in 2004 to $161 billion over the next several years … we understand 2006 is shaping up to be even stronger than 2005. As a result, the settlement market may reach $161 billion sooner than our original expectation.” Bernstein Research Report, May 19, 2006

Market Potential

“The Benefits of a Secondary Market for Life Insurance Policies,” a study published by the Wharton Financial Institutions Center¹, concludes that the secondary market for life insurance is both pro-competitive and pro-consumer. By allowing companies to compete for underperforming or unneeded policies, the secondary market has generated greater consumer choice and favorable valuations for consumers. This secondary market regards life settlements.

Over the past few years, institutional investors have entered the life settlement industry as financing entities, willing to buy up those unwanted insurance policies for investment purposes. It's not surprising that financial planners and the insurance industry have taken notice. In addition, the age of the United States' population is steadily increasing. In fact, the US Census figures reveal that the senior population is expected to double by 2025.

Moreover, the same study concludes that when competition is encouraged for underperforming or unneeded life insurance policies, the secondary market, life settlements, serves to enhance policy valuations and leads to product innovation, providing an excellent opportunity for the consumer.

The life settlement market today is much more heavily regulated than the old viatical marketplace. Many states now have regulations requiring licensure for those involved in the life settlement business.

¹The Benefits of a Secondary Market For Life Insurance Policies by Neil A. Doherty & Hal J. Singer (02-41) published by the Wharton Financial Institutions Center 2002.