In recent times, a significant number of older adults find themselves with life insurance policies that have either become redundant or too costly to keep up with. Without proper knowledge and advice, many miss out on a beneficial opportunity: selling their policy for cash. According to a survey by the Life Insurance Settlement Association, clients who opted for a life settlement received, on average, 5.2 times more than what they would have gotten from surrendering their policy back to the insurance company. What’s even more startling is the ability in many cases to sell a term policy, which has no cash value, for cash.
Over a century ago, the U.S. Supreme Court established that life insurance is a personal asset. This pivotal ruling affirms your right to sell your life insurance policy, similar to how you might sell a car or a watch.
A recent study revealed that about 67% of senior participants knew they could consider a life settlement, yet a similar percentage let their policies lapse due to high maintenance costs. This indicates a widespread lack of awareness about where to seek advice regarding life settlements.
From my experience with clients, we've noticed that many either struggle to pay their premiums or realize they no longer need the death benefit, especially when their children are financially independent.
Consider this practical scenario: if given a choice between surrendering your policy for its cash value or selling it to an institutional investor for three to five times that amount, which would you prefer? The answer is likely the latter.
Who buys these policies? The market ranges from individuals to institutional investors, like pension funds and hedge funds. We advise selling to institutional investors for the added security of pooling your policy with others.
It's also worth exploring other alternatives as part of your policy assessment, such as taking a policy loan to keep it active, reducing both the death benefit and premiums, or converting a term policy into permanent insurance.
For further insights into the unique advantages of a Life Settlement and other options, feel free to reach out to us.
barry.boscoe@brightonadvisory.com Office: 818-342-9950
Mobile: 818-802-0686
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