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How to Leverage Your Insurability? - Premium Finance & Life Settlement

Boaz Arbel

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With advances in medicine and technology, mortality tables have been change dramatically in recent years. At the bottom line, we live longer. For some of us, this is much longer than they expected. If 20 years ago a 65 years old retiree thought he'll live till the age of 83 or so, now days he more likely to reach the age of 87.

In some cases these senior citizens need more supplemental cash in order to maintain their standard of living. Since they do not want to liquidate any tangible assets they have.

Today, few financial tools can help these senior by leveraging their insurability.

In this article I'll spread information about two ways seniors can tap into cash that in most cases they did not know they have.

The first method is Life Settlement or Senior Settlement where an old life insurance policy is being sold on the secondary market and leaves the insured with lump sum of cash. However, no insurance coverage is now protecting the senior. In order to qualify for a life settlement, the insured must posses a policy that is out of contestability and has a death benefit of minimum $250,000. However, some providers will buy a policy that is less than $250,000 , some other criteria has to do with the insured age (65 and above) , life expectancy (2-12 years) , premium on the policy (less than 5% of death benefit) and cash surrender value not to be more than 30% of the death benefit.

If all parameters fit the buyer's criteria, an average of 20% of the face value will be paid to the insured as a life settlement less any commission paid to the agent (Broker) who handles the case. Results may vary from case to case.

The second method is Life Insurance Premium Finance. Each and every one of us have hidden asset called insurability. Our insurability allows people to obtain life insurance up to their net worth which all we have minus what we owe. For example a 77 male who's house worth $1,200,000 and has a vacation home that worth $500,000 plus some stock and pension may have a net worth of $2,000,000 to $2,500,000. What it means is that that person has insurability of $2,500,000 assume no life insurance is in force.

Using the premium program will allow the insured to obtain a loan to finance the premium on the policy. The insured will assign the policy as collateral for the loan plus a personal guarantee equal to 25% of the loan. After the loan is mature (usually 2-5 years)

The insured will have to decide what to do. At that point the insured will have few options:

The first is to pay the loan plus interest and assume full responsibility for future premium. 2nd option will be to renew the loan for another period and to assign more personal guarantee. 3rd option will be to sell the policy on the secondary market as a life settlement.

If choosing the life settlement option, the following numbers should be considered:

$2,500,000 life insurance policy on a 77 years old male will generate an annual premium of around $125,000 plus interest and fees.

After 2 years the total loan can reach the amount of $300,000. With a settlement offer of 20% of the face value the amount will be $500,000.

After paying the loan, the insured will remain with $200,000. Based on the deal structure the insured may have to pay a commission of up to $60,000 to the agent/broker who brokered the deal.

With the Premium Finance Program, if insured passes away during the loan period, the processed will cover the loan and the rest will go to the beneficiaries

In conclusion, senior citizen have some options when it comes to generating cash using their insurability via channels like carrier approved premium finance program and life settlement program, all designed to help them use their life insurance policy and their life insurance insurability.

Boaz Arbel is the General Manager at Arbel Life, LLC, a New York based company that specializes in the high net worth senior market. To obtain further Information about Life insurance Premium Finance, Life Settlement and to read additional articles about these subjects please visit the website: you may also read all publications at


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