The Secondary Market for Life Insurance

The Secondary Market for Life Insurance

The reasons for insured persons not holding onto and resigning from life insurance are manifold and often personal. A large part of the insured then takes high discounts and discounts in purchasing, which were laboriously saved and acquired over decades. However, there is also a secondary market for life insurance, where qualified providers buy such contracts and thus up to 15 percent more income is possible than would be the case with a termination.

This article clarifies the basics and provides information for interested insured persons.

14 billion euros in annual cancellations

The sum above indicates the volume of life insurance that is terminated year after year. A huge sum, one takes the resulting discounts and the loss of assets of the insured concerned. However, with a average contract duration of 25 years , which demands a lot from insured persons, it is no surprise that long-term benefits are adjusted to short-term needs. The most important reason in this course, however, is the possible loss of saved, with calculated final overdrafts. Especially in low-interest-rate policies, which often only count on the market because of this fact alone, are among the biggest losers.

Following this development, but above all seeing the potential in it, the secondary life insurance market is steadily moving. The industry specialist Policen Direkt, with over 70 percent share of the market's key player, has aligned its business model and offers customer-friendly scenarios of the most diverse kind. The fact that professional investors take over appropriate policies and serve them until final maturity can average on average 15 percent higher sales revenues

The secondary market as a lifesaver for more liquidity

A key advantage for insured is that the insurance industry does not impose any restrictions on such a sale. For this reason, every insured person is in the first place able to use his policies accordingly. The sale of endowment policies should be in the context of maximum transparency. So it is a basic requirement that the insured the so-called death protection is maintained. Accordingly, one continues to be insured, the beneficiary persons inherit the respective benefit in case of death. All current, offset costs and contributions as well as the corresponding purchase price are deducted from this.

Another important point is, above all, to be skeptical about the tax advantages for certain policies. Those completed before 2005 are currently covered by the same legislation and will not be subject to capital gains tax, which adds further benefits. If one also considers the fact that policies are continued and surpluses accumulate, a corresponding payment can be expected on the due date.

Selection Tips

After we have considered the basics and advantages, we will devote ourselves to the last section of the selection guides of buyers. For even with valid contracts, it could happen that the company has to cope with short-term liquidity bottlenecks and ultimately the payout appears doubtful overall. Partial payments, as they are offered in some cases, are suitable against the background of risk diversification Therefore, only limited and should be avoided.

Furthermore, it must be emphasized that a bank acts as a trustee and transparently oversees all processes of the transaction. This service applies to the outside as a quality feature and is effectively advertised offensively, whereas in other cases with other knitting traps is expected. In addition, check out which companies are actually accepted by the buyer, so that a broad base becomes visible.

So-called quality assessments , such as those carried out by rating agencies, are considered a further signal for review , The decisive factor here is the size of the market in relation to the company in order to draw conclusions about capital strength and general competitive situations. As these tests are often conducted by independent commissions and based on objective standards, they provide a further basis for selecting the buyer.

Artikelbild: © Jirsak / Shutterstock