Keyman Insurance Applications

Need for Keyman Insurance. Owners of businesses often will hold keyman life insurance, primarily because commercial banks require such coverage to hedge lines of credit, debt consolidations, and business loans. When the firm is sold, acquired, or merged, the keyman life insurance policy becomes displaced.

Market Value. That is to say, when a business owner decides to sell the business, the keyman policy does not serve its original economic function because the former executive insured by the policy is no longer with the firm. Statistically, we know that 90% of these policies are simply allowed to lapse, or are surrendered for their cash value. The cash value of an insurance policy does not indicate the real economic value of the policy because it is a one-sided offer from the insurance carrier.

In contrast, now one can got to a global marketplace where policyholders are afforded the benefits of receiving multiple bids from bulge bracket participants in the secondary market for life policies, rather than just relying on the cash surrender value offered by the originating insurance carrier. Understanding the life settlement option is integral to capital valuation in the 21st century.

Life Settlements Market

The specialization, infrastructure, and know-how required to efficiently facilitate these high net-worth transactions far exceeds the standard case because the variables involved are more dynamic.

Some businesses work with the nations leading M&A firms, business brokerage franchises, and investment banks by serving as a specialist in integrating life settlements into capital valuation. Applying life settlements to the sale of businesses will enhance the margins realized by your clients, increase the value of advisory services offered by intermediaries, and distinguish M&A advisors from the competition.