Senior Fractional Life Settlements

There are hundreds of ways to invest your money, all of which feature specific levels of risk and potential gain.  Whether you are new to investing or quite experienced, you may occasionally wonder how large institutional investors mitigate risk in their portfolios and how the “Smart Money” chooses to invest.  They almost certainly use some of the same investments and strategies as you do, but would it surprise you to learn than there are other tools at their disposal that you may not know about that helps them often achieve superior results?


In fact, for nearly 20 years, the world’s leading institutional investors like Berkshire Hathaway, Blackstone and Morgan Stanley have been profiting from an innovative and proven asset class, one you’ve probably never heard of.

This asset is called a life settlement and it comes from a mutually beneficial concept.  Life settlement investing starts when a senior insured, usually 65 or older, wishes to sell their existing insurance policies on the secondary market for a greater value than the issuing insurance company would have paid if the client had surrendered or lapsed it, but for less than the death benefit amount.  Now, investors like you are able to purchase interests in fractions of these life insurance policies as non-correlated assets to be added to your investment portfolio

Why haven’t you heard of life settlement investing until now?

While utilized by institutions for decades, life settlements were neither widely known nor readily available to the general public until fairly recently.  Life settlements do not correlate to traditional investments like stocks, bonds, real estate or any other financial markets. In fact, you don’t even need to be confident in the stock market or economy to start taking advantage of this unique, historically profitable asset class now that it has become available to qualifying residents of California.  Neither are these assets dependent on oil prices, the price of gold, geopolitical events, or other factors that you would need to account for with traditional investment opportunities. What’s more, life settlement investments can net very attractive returns while simultaneously providing true, meaningful diversification to a portfolio.

First appearing in institutional investment portfolios in the United States in the 1990s, many experts continue to project strong market growth of this asset class. The Life Insurance Settlement Association (LISA) estimates more than $100 billion of life insurance policies are lapsed by seniors 65 or older each year. Not only can these seniors benefit from life settlements in many instances, but investors like you can as well. Consider some of the trends experts highlight to underscore their market projections: the aging baby boomer population, increased financial uncertainty with global markets and an increased awareness of life settlements.

If you are a qualified California investor and would like to explore this opportunity further, reach out today to learn more by requesting a free consultation.

Maintain Your Quality of Life

Fractional life settlements have grown substantially in the past decade alone, with financial experts projecting their continued growth in the next several decades. As their popularity with individual investors begins to rise to meet that of other asset classes, life settlements will continue to offer seniors a way to benefit significantly from unneeded or unwanted life insurance policies that many of them already carry.  By choosing to sell an existing life insurance policy rather than simply surrendering it, seniors can enjoy significantly better market values.

Many seniors today may struggle with their retirement income and asset values with little idea how they will afford the care they need or maintain their lifestyles.  Luckily, many of these seniors are also sitting on life insurance policies that they either do not want or can’t afford. In the secondary market, these policies can and do sell for substantially more than their cash value, which can make all the difference in the lives of many who are entering or are already at retirement age and having trouble supplementing their loss of income.  Life settlements help seniors to maintain their quality of life by introducing them to a market willing to give them typically three to five times the cash-surrender value for their life policies.

The inherent value to both policyholders and investors, coupled with the low correlation to other markets are what make life settlements such an attractive asset class. Get started augmenting your nest egg today by giving your portfolio the chance to increase returns without exposing yourself to additional stock market or real estate risk; get started with life settlements.

Too much risk, too much risk, too much risk ...

The Value of a Life Insurance Policy

If you were the holder of a life insurance policy, you would continue paying your annual premiums while hoping that the day doesn’t come any time soon when you or your family may have need of the policy’s benefits.  But if you ever were to find that you can no longer make those premium payments or that you need to cash out the plan in a pinch, you might be unpleasantly surprised by just how much your life insurance policy is worth. Until the advent of life settlements, the only option given to a policy owner when they could not, or no longer wished to, continue paying on their life insurance policy was to surrender the policy back to the issuing insurer.  However, life settlements and the ability to sell a life insurance policy in a secondary market for a much greater value were a real eye opener to just how little owners were getting when surrendering their policies to their insurance companies.

The Wharton Business School Study

There is no better way to put it: the sheer percent difference in value when surrendering a life policy versus selling it on the fair market is shocking.  And it wasn’t long after life settlements became popular for large investors in the 1990s that individuals and experts alike started to take notice of the difference in value these policies were receiving based on how the holder chose to dispose of them.

In 2002, the Wharton Business School at the University of Pennsylvania became one of the first to publish a major study into life settlement investing.  In the large sample of data pulled, the study showed that the total surrender value of these policies was $93.4 million. However, it was then found that the very same policies, at fair market value, would have totalled $336.3 million. Essentially, Wharton School found that the difference between a cash surrender value for a life insurance policy and a fair market sale value for that same policy as a life settlement is a truly astounding 360% difference!  This in turn has led to life insurance settlements becoming quite popular with the “Big, Smart Money” investors who take advantage of the opportunity created. These investors can profit from the death benefit payout of the insurance policy once the policy matures.

Lapse Rate

Milliman Inc, a leading actuarial firm, reports that nearly 90% of all universal life insurance policies taken out are ultimately either surrendered by the holder or lapsed without payment of a death claim. This rate is considered even more outrageous considering that this is also a number that life insurance carriers aim to conceal from their insurance holders and the public in general.

Blackstone May 31 2016 Cover of Forbes

May 31, 2016 Cover of Forbes

For Example

Suppose you are the holder of a life insurance policy worth $1.5 million and that you pay an annual premium of $40,000 per year in order to keep your policy active. If you’ve been paying these rates for almost 5 years, you can expect to have paid a total of $200,000 to your insurance company.  You might now have a cash surrender value for your policy of somewhere around $60,000. How is this value determined? When you pay the premium on your insurance policy, a portion of it goes to the premium payable for the death benefit, while another portion goes to the investment component, known as your cash value.  The portion of your payment that goes towards the cash value is invested on your behalf by your insurer.

Now suppose you lose your job and have to take a lower paying position, or you experience an unexpected medical cost.  What happens when you can no longer afford to pay your life insurance premium? Do you have options when it comes to what happens to your policy next?  Unfortunately, many individuals aren’t aware that they do have options when it comes to dealing with life insurance premiums they can no longer afford. Because of the lack of knowledge about the life settlement investment process, many choose to cash in their policy for a relatively meager cash surrender value.  Still others, not knowing that their policy contains this feature, will simply stop making their annual payments and allow the policy to lapse, leaving them nothing.

Now, all life insurance policy holders are able to explore the open market where they can receive an average offer of 20% of the policy’s face value. In the above case of a $1.5 million policy, you can expect to net $300,000 in the secondary market; a difference in value of roughly $240,000 over and above the $60,000 surrender value.


Life Settlements’ Performance Steady as Markets Crashed in 2008

Life Settlement Performance During The Most Recent Bull Market

*Fractional Life Settlements are only available to financially qualified California investors.

If you are a qualified California investor and would like to explore this opportunity further, reach out today to learn more by requesting a free consultation.