Overview of Life Settlements
What is a Life Settlement?
A life settlement is the sale of a life insurance policy that is owned
by a senior citizen, age 65+, or a person with a life expectancy of 15
years or less, for a lump-sum of cash today that is greater than the
cash surrender value of the policy, but less than the death benefit of
the policy.
Who buys the policy?
Christian Stanley makes markets, both domestically and internationally,
with over 20 institutional funders that provide seniors with lump-sum
cash payments in exchange for life insurance policies that are no
longer needed or wanted. The funding institution is the final purchaser
of the senior citizens life insurance policy.
How does Christian Stanley maximize value?
By creating a competitive auction market, we are able to consistently
earn seniors, on average, 4-times the cash surrender value offered by
the insurance carrier. Why are purchasers willing to offer more than
the cash value of a life insurance policy? The cash surrender value of
a life policy does not reflect the true economic value of the asset in
a competitive market environment because it is simply the lowest value,
or floor value, of the life insurance policy. Allowing parties external
to the origination of the policy to submit a bid is necessary if one is
to earn the fair market value of the life insurance policy.
Do I own my policy? The life settlements market is referred to as the secondary market
for life insurance policies. Life insurance is private property. Like
cars, homes, stocks, and bonds, it can be sold in accordance with
applicable laws. Our industry has exploded from only $50 million (US)
in 1990 to over $4 billion (US) in annual transactional volume in 2002.
The Wharton School of Business projects that our industry will reach
$15 billion in annual transactions by 2006.
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