Did you know that your life insurance policy may be worth much more than the cash or surrender value? In addition, if your term policy has conversion privileges, it could also be worth a considerable amount of money. There is now a market for life insurance policies. It is called life settlements.

Here are the conditions that most life settlement companies would consider. The insured must be at least 60, but some require the insured to be at least 65. The policy must be in effect for two years or more, and the policy must not be in default. The face amount must be at least $50,000, but some companies require higher face values before considering a purchase. Some companies will purchase only a portion of the face amount. The value will be determined by the age of the insured, medical condition, cash value if any, loans outstanding and the terms of the policy.

The best procedure is to have a broker take your application and submit it to several companies to obtain the best offer instead of going to one company. The insured or owner may reject any offer with no expense or obligation.

Why would anyone want to sell their life insurance policy? Circumstances change. For instance, the owner or insured may no longer be able to pay the premium or want to continue paying the premium. The reason for the insurance has changed: For example, children have grown, the spouse is deceased or no longer needs the protection, the owner or insured would like to invest the proceeds elsewhere, or the policy return is unacceptable. Of course there may be other reasons to sell a policy. These are a few:

- A 75-year-old man owns $1-million in universal life. His estate has diminished in value, negating or reducing the need for a policy that was originally established to allow the heirs to meet the estate tax liabilities.
Annual premium: $34,000

Cash surrender value: $47,000

Net offer: $170,000

Net gain: $123,000

- A 78-year-old woman owns a $2.5-million "second to die" policy, and her husband has passed away. Because of circumstances, she doesn't want to continue paying premiums and decides to let the policy lapse.
Annual premium: $72,000

Cash surrender value: $142,000

Net offer: $550,000

Net gain: $408,000

- An 82-year-old man owns a $10-million policy that was underfunded; if he wanted to continue the coverage, he would have to pay double the amount in premium than projected a few years back.
Annual premium: had jumped to $485,000

Cash surrender value: $569,000

Net offer: $2.5-million

Net gain: $1.931-million

If selling your life insurance policy interests you, then a life settlement could be the solution.

_______________________________________________________________

By Bob Cohen

This information was provided by Robert "Bob" Cohen, a graduate of Boston University with a bachelor of science in business administration and a doctorate of laws. Cohen practiced law in Portland, Maine, for 30 years before moving to Citrus Hills in 1992. He holds a Series 7 stockbroker's license and a Florida insurance license.

© 2006 • All Rights Reserved • St. Petersburg Times