A Life Settlement is the sale of an existing life insurance policy to a licensed life settlement provider for more than its cash surrender value but less than its net death benefit.
Many American seniors—typically those
70 years of age or older—are discovering that life insurance policies that once seemed appropriate, no longer meet their needs.*
The insurance companies do allow their customers to surrender their policies, which means the policyholder will be offered a mere fraction of the policy’s
As stated above, a life settlement is the sale of an existing life insurance policy for more than its cash surrender value but less than its net death benefit. Such transactions, usually undertaken for the purposes of estate or financial planning, can put a choice in the hands of American consumers.
As this page will show, life settlements represent an important option for a growing number of people who may have thought that they had no options at all. Rather than continuing to pay premiums on a policy that no longer serves its original purpose, life settlements can offer consumers payoffs that can be significantly greater than surrendering a policy. Life settlements offer a reasonable and profitable exit strategy that addresses the financial objectives of policyholders.
Looking for Options and Opportunities
Changing priorities or dissatisfaction with life insurance policies may drive policyholders to discontinue their existing life insurance policies. While policy owners have had a legally protected right to sell (or “assign”) a life insurance policy for almost a century, until recently, few have taken advantage of this opportunity.
Here are some of the factors encouraging insured individuals to reconsider the value and necessity of their current policies:
A Paradigm shift in consumer thinking. Americans have an extraordinary amount of choice in most products and services. Similarly, they have come to expect the same amount of freedom to maximize value in the realm of life insurance. They are recognizing that life insurance is merely one asset within an estate or financial portfolio that should be managed for optimum outcomes. They are no longer willing to treat life insurance as an “untouchable” product that must always be held until death.
Guidance from their financial advisors. As the poor performance or under-performance of certain life insurance certain universal life insurance policies become increasingly clear over time, financial advisors – and even the independent agents who originally sold the policies – are exploring options with their clients. Financial advisors, who are increasingly attuned to the changing needs and priorities of their customers over time, may suggest alternatives. Many independent insurance agents, who have an inside perspective on how individual policies have performed, are beginning to discuss options with clients. Some insurance companies, in contrast, do not fully advise their clients about their choices.
Feathering the empty nest. As Americans enter their senior years, they often experience unexpected changes that alter their priorities. Policies that once made sense for them, may no longer make sense under new circumstances. For instance, decisions that seemed appropriate when policyholders had children in the house may no longer seem appropriate once the children are grown and have moved on. These life changes may drive some seniors to decide that a given life insurance policy is no longer relevant and that other steps should be taken to achieve full financial empowerment.
Dissatisfaction with existing policies. Whether the driver is changing circumstances, better financial options or the availability of superior policies that render old ones obsolete, many seniors may find themselves dissatisfied with their existing policies. Indeed, quality improvements in insurance policies over the years are driving individuals to abandon policies they consider to be outdated.
Rising policy premiums. Many people are not prepared for the steep escalation in premiums that accompanies ownership of many policies. Moreover, they may be hit with these policy increases at the precise time that they are experiencing mounting health care costs and other financial concerns. Under such circumstances, a policy may seem to be a lower priority than it might have been in the past.
These factors have created the demand for alternatives among many who now hold life insurance policies. Such alternatives are now becoming visible to consumers.
* 2015 Life Insurance Settlement Association - www.lisa.org
For more information on this please visit LIFE INSURANCE SETTLEMENT ASSOCIATION
What is a Life Settlement?
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