Life Settlements for Corporate-owned Life
Insurance
Life settlements aren’t just for individuals: Businesses can also use life settlements to transform an unneeded policy into a liquid asset.
Businesses frequently purchase life insurance policies for a variety of reasons. The most common are:
- to fund a buy-sell agreement upon the death of a shareholder;
- to fund executive compensation; and
- to guard against the death of a key employee.
Sometimes, businesses also purchase life insurance as a general investment, although new tax rules enacted as part of the Pension Protection Act of 2006 may make this less common.
Corporate-owned policies can provide essential financial security in many situations, but changes in circumstances frequently render these life insurance policies obsolete. For example:
- A key employee policy may become unneeded after the retirement of an executive.
- Compensation changes or the departure of an executive may make a policy to fund deferred compensation unnecessary.
- Transfer of ownership may be completed without the use of a life policy funding a buy-sell agreement in the event of a shareholder’s death.
In the past, businesses with unneeded life insurance had few options. They could keep paying premiums, and hope to profit in the future, or—far more commonly—they could surrender the policy and collect its cash value (less any surrender charges).
Life settlements provide business a new and profitable third option: Sell the unwanted policy to a third party for a cash payment. With the help of a life settlement broker, exploring this third option is easy and involves no upfront costs or commitments.
Life settlements routinely generate three or four times the cash surrender value of a permanent life insurance policy. And life settlements can even be used to obtain cash for otherwise worthless term life insurance policies. Almost any type of policy may qualify for a life settlement, so long as the insured life is at least 56 (preferably 65).
Before any business surrenders a life insurance policy, it should explore a life settlement. Seeking offers is costless, and a life settlement will always generate more cash than a surrender.
If your business has a life insurance policy it no longer needs that insures the life of someone at least age 56, we urge you to call Open Life Settlements at 866.877.4054. We will be happy to discuss your policy options and the life settlement process.
