Should not your insurance agent inform you of all available options?
A Life Settlement could be your solution to rising or burdensome premiums on life insurance you no longer need. Unfortunately, uninformed seniors surrender life insurance policies every day, without ever realizing that they could have received more than double their surrender value by simply utilizing a life settlement.
All but about 5 states now have at least some Life Settlement regulation and life settlement licensing requirements. Several states led by Washington, now mandate that insurance agents inform their clients of the life settlement option. The fact that there are states that now require their residents be advised of this option by their Insurance Company, speaks volumes around how mainstream Life Settlements have truly become.
This creates a major conundrum for some insurance agents whose insurance companies ’strongly discourage’ their disclosing the option to surrendering policy holders. Your insurance agent should never have to choose between their fiduciary responsibility to you and a conflicting company policy, but that is exactly the situation that some captive agents feel that they now face.
There are various estimates, but it is safe to declare that more than 80% of life insurance policies never pay a death benefit. Somewhere along the way people either lapse their insurance policy, borrow all of the money out or simply surrender their policy for any cash value that is available.
Cash value life insurance such as Universal Life was often sold with long term projections and illustrations of 8% and up. When interest rates went down, interest sensitive insurance policies could not perform to those expectations. Considering that the amount of insurance you pay for each month within these plans is often related to how well the cash portion is performing; it can have a very severe impact on the ability of the policy to make it to maturity, without escalating your premiums.
If you are paying for term insurance or just the cost of insurance inside of a permanent plan, you have certainly noticed by now how dramatically the cost of insurance can increase in the later years of your life. Some people have been forced to lapse their insurance due to rising premiums. You need to understand that there is now an option, if you qualify, to get more than the promise of zero.
“Fun is like life insurance; the older you get, the more it costs.”
-Kin Huddard
Before you surrender or lapse your life insurance policy, take the time to have your insurance policy appraised, then research and explore all of your options. If you are over 65 years of age, a life settlement could be the solution for which you have been looking, but you still need to do your homework.
Life Settlements allow you to harvest some of the intrinsic value that you have accumulated in your insurance policy… by living. With a life settlement, even your unneeded term insurance policy and your insurance policies with no cash surrender value may now actually hold value… to you.
Case Study: 77-year-old male
- Policy Face Value: $5M
- Annual Premium: $214,500
- Offer: $800,000
- Policy Type: UL
- Cash Value: $0
- Summary: This gentleman had taken out a life insurance policy years ago in order to cover the taxes on his estate. His estate no longer required insurance coverage for tax planning purposes, but his policy had no cash surrender value. He did not want to lose all the money he’d paid in premiums over the years, so he decided to pursue a life settlement.
You will want to have your own insurance appraisal prior to attaining quotes and bids for your insurance policy. Consider its value illiquid, like your home. No two are the same and it is always good to have a price point before speaking to a Realtor.
An accurate assessment of the market is important to have and before you enter into negotiations for the sale of your insurance policy. Keep the results of your complementary appraisal to yourself at first, when attempting to get the highest life settlement offer. It allows you to see where the numbers fall in a sterile environment. It also exposes greed. An appraisal will give you an accurate range of value for your policy so that you can begin planning beyond the hypothetical, but an appraisal is not a guarantee.
Case Study: 80-year-old female
- Policy Face Value: $1.5M
- Annual Premium: $36,052
- Offer: $ 234,000
- Policy Type: UL
- Cash Value: $0
- Summary: The size of the estate had decreased and it had also become very difficult for her to pay her annual life insurance policy premium. She needed to sell the policy or it was going to lapse and her policy had no cash value. She decided to test the market and find out the value of her policy from a life settlement perspective, and was thrilled to ultimately receive an offer of nearly a quarter of a million dollars in the form of a life settlement.
