88% of Universal Life and 99% of Term Policies do not result in a payout of the Death Benefit.* This occurs because most policy owners decide they don't want, don't need or can't afford their policy. Let us help you get on the right side of that equation.
By filling out just our application, your case will be presented to all relevant buyers.
We cover the market efficiently, so you don’t have to.
A Life Settlement is the sale of an existing in-force life insurance policy to a third party via the secondary institutional market in exchange for an immediate lump sum cash payment that is less than the policy’s face value, but higher than the policy’s cash surrender value. It often can be three to five times the cash surrender value (CSV) of the policy and relieves the policy owner of all future premium payments on the policy.
All policies are eligible for a Life Settlement including Term Life, Universal Life and Variable Universal Life, Survivorship and Whole Life, with the general rule of thumb being the insured is over 70 years old with a minimum of $500,000 of insurance.
Did you know that 88% of Universal Life Insurance Policies end up lapsed or surrendered?
Only 12% end up in a Death Benefit claim!
Melville Capital is committed to changing those numbers. More often than not, existing Life Insurance Policies are overlooked; treated as an expense and not as the valuable and saleable asset that they are.
Life insurance provides financial solutions that help the Policy Owner meet various family or business needs, but sometimes these needs change. Now thanks to the increasingly competitive Secondary Market, life insurance is no longer treated as just a Death Benefit. Like stocks, bonds, real estate and other investment holdings, life insurance has become a fully evolved asset with a FMV (fair market value) – an asset which can be sold by its owner at the highest market price. Also, rather than just selling an unwanted, obsolete or unneeded policy, an inured may elect to use the sale proceeds to purchase new coverage with lower premiums or no premiums at all.
Until recently, if determined that a policy was no longer needed or wanted, there were only three options that were typically considered: (1) allow the life insurance policy to lapse; (2) continue to pay premiums and keep the policy in place; (3) surrender the policy to the insurance company for the cash surrender value.
The settlement amount will be determined by a combination of:
Life Settlements are being used for many reasons such as providing the necessary funding required to obtain a more contemporary policy, funding dependant care/immediate needs and to achieve other complex financial planning goals.
As a point of reference, in 1911, Oliver Wendell Holmes, a well known Justice of the US Supreme court, laid the groundwork for today’s Life Settlement marketplace. In the case of Grigsby v. Russell, Justice Holmes established the policy owner’s right to transfer ownership of an insurance policy. In addition, The National Association of Insurance Commissioners recognizes Life Settlements as a viable solution and the AICPA as well as the American Bar Association recognize an advisor’s fiduciary duty to discuss settlement options with their clients.
The market for insurance has seen many unique opportunities arrive in such a short period of time. At Melville Capital, we strictly focus on Life Settlements. However, our transactions are frequently confused with other opportunities that are being talked about today.
The Life Settlement market is flourishing. Presently over 35 states regulate Life Settlements and the National Association of Insurance Commissioners recognizes them as a viable solution that will remain active in the insurance marketplace. The AICPA as well as the American Bar Association recognizes an advisor’s fiduciary duty to discuss settlement options with their clients.
The following is provided strictly for informational purposes only and we strongly recommend policy owners seek guidance from a professional tax advisor prior to submitting a policy for sale and accepting any offers.
In general, there are four components to determining taxation on life settlements.
According to IRS revenue rule 2009-13, gross basis must be reduced by a cost of insurance. The carrier might supply the COI but it is unlikely. If not, industry norm is that professionals to use IRS life insurance tables to estimate the COI.
Gross basis= $50k
Cost of insurance= $18k
Net purchase price= $100k
Cash surrender value= $60k
Click Here to access the official Internal Revenue Bulletin 2009-21 in reference to revenue rule 2009-13.
Please be advised that Melville Capital is not a tax advisor and does not provide tax advice. Melville Capital does not make any representations as to the tax treatment of a sale of a life insurance policy and recommends that you seek out a professional tax advisor.
An ideal candidate for life settlement includes:
Also, rather than just selling unwanted, obsolete, or unneeded life insurance policies, an insured may elect to use the sale proceeds to purchase coverage with lower premiums or no premiums at all.
Appraisal Process Consists of:
Completing the Settlement Process:
According to the American Council of Life Insurers:
The life insurance industry reports that currently there are approximately $14.5 trillion of in-force policies in the U.S., with more than 10% owned by senior citizens.
The Wharton Financial Institutions Center recently reported that more than 20% of policyholders over the of 65 are estimated to hold policies whose economic values far exceed their cash surrender values.
Studies conducted by two of the leading research organizations for the life insurance industry, Conning, Inc. and Matthew Greenwald Associates, estimate that approximately $500 billion currently qualify for Life Settlement transactions.