Life Insurance Settlements and Life Insurance Settlement Companies
Elders are discovering unexpected hidden value in their life insurance policies by way of life insurance settlements.
Life Insurance Settlements involve transferring the ownership of your unneeded life insurance policy for an amount of cash that is higher than your policies cash surrender value, but lower than the face amount. Life insurance settlements are typically an option for seniors who no longer need their life insurance and have had at least some slippage in their health status since they initially took out their life insurance policy.
Take the recent case of a 77 year old male retiree who had a $5MM universal life insurance policy that he had taken out to cover estate taxes. The premium was $215,000 last year and slated to go up. His estate had diminished due to the financial markets in general and he no longer had a need for the life insurance coverage.
The $215,000 annual premium became burdensome and the policy was already depleted of cash, partly due to lower than projected interest rates from when he initially took out the policy. With no cash value, his options were limited. He submitted his policy for a life insurance settlement quote and the value in the life insurance secondary market was $800,000. Imagine getting an unexpected $800,000 for selling your life insurance policy that contained no cash value.
Each life insurance settlement has to be looked at individually and no two are the same. The life insurance settlement industry is a bit like real estate with respect to assessing value, except that instead of comparing and contrasting location and square footage, a life insurance settlement company assesses many other variables.
The rating and solvency of your insurance company, your premiums and cost of insurance, any cash value, your state of residency and your health all have to be considered when valuing a life insurance settlement. Life insurance settlement companies have to be licensed in your state in order to be able to legally acquire life insurance policies.
A few States now require that your insurance agent inform you, the consumer, of the life insurance settlement option when you are contemplating a surrender or a lapse of your life insurance policy. Most states still do not.
If you were in great health when you applied for your life insurance; you probably received a preferred (read that as cheapest) cost of insurance. The more you had wrong with you then, the more you probably still pay in insurance premiums each year and for the rest of your life. Any slippage in your health since then that has led to a shortened Life Expectancy (LE) calculation, could ultimately yield value as a life insurance settlement. Getting a life settlement quote that takes your total health into account is important. Before you cancel unneeded life insurance policies, you should get your life insurance policy valued as a life insurance settlement and research your rights as provided for by your state.
Considering that roughly 10,000 people are turning age 65 every day in the United States alone, that in excess of 80% of life insurance policies lapse without paying a death benefit and the fact that most states are now regulating and licensing the Life Insurance Settlement Industry; Life Insurance Settlements are here to stay.
To be a life insurance settlement candidate, you should be at least 70 with some slippage in health since your life insurance policy was issued. Minimum face amounts seem to average around $100,000 with those that are over $500,000 being preferred by most funds in the secondary market.
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