Senior Settlements-Why Not Sell Your Life Insurance Now?

SENIOR SETTLEMENTS --
Why Not Sell Your Life Insurance Now?

By Jerome R. Corsi, Ph.D., Senior Savvy Editor

Yes, you can sell your life insurance and you don't have to be dying to get some good cash for your policy. Senior Settlements, a rapidly developing area of the life insurance industry, creates a market to buy the life insurance policies of seniors for cash now.

Simply put, Senior Settlements are a tool that allows a third party purchaser to buy the right to become the beneficiary of a client's policy, assuming the responsibility to pay all remaining premiums until the death of the insured. At the death of the insured, the third party purchaser receives the death benefit of the policy.

There is an estimated $1.2 trillion worth of senior life insurance policies currently in force in the United States. The life insurance expects 96% of all senior life insurance policies to lapse, with no death benefits paid to beneficiaries. Seniors all too often simply decide the life insurance coverage is no longer needed and stop paying premiums. As a consequence, the policies lapse and the life insurance industry is not required to make any payments to beneficiaries.

By taking advantage of a Senior Settlement, seniors can receive approximately 10% of the face value of their term policies and more for their whole life or universal life policies. The life insurance policy is sold for an immediate cash settlement.

Consider the following two cases:

Company held "key man" insurance on its former CEO - a term policy with a face value of $4 million and no cash surrender value. The insured was a man in his late-60s who suffered from adult-onset diabetes and related complications. The company decided to let the policy lapse. The firm's insurance agent suggested that the former CEO might benefit from looking into a Senior Settlement. As a result of the insurance agent's creative insight, the former CEO pocketed $760,000 from the sale of the "key man" term insurance policy.

The president of a closely held family company was retiring. The firm held a $3 million term policy on his behalf, which they were allowing to lapse because of escalating premiums that called for a three-fold increase the following year. At the insistence of the president, the firm looked into a Senior Settlement. To their surprise, the policy, which had no cash value, was purchased for $600,000.

The amount of cash involved in the Senior Settlement depends on the insured's age and relative health, as well as the policy's costs, duration and cash value. In the world of Senior Settlements, being older and in poorer health will generally result in a larger cash purchase of the insurance policy. Life insurance policies with accumulated cash value, as is typically the case with whole life and universal life policies, also generally command larger cash purchases. Still, term policies with no cash value and life policies, which require continued premium payments often generate substantial cash purchases in the Senior Settlement marketplace.

To benefit from a Senior Settlement you do not have to have a $1,000,000 life insurance policy or be over 80 years old. The following examples make the point:

A Female, age 70, sold a $100,000 universal life insurance policy with $2,000 cash value for $14,000.

A Male, Age 75, sold a $250,000 term life policy with zero cash value for $70,000.

The Senior Settlement marketplace has few requirements. The policy must be still in force and must be at least two years old. While Senior Settlements can be expected to pay 10% of the life insurance policy's face value, you might be able to get as much as 40% of your policy's ultimate value. Selling your life insurance is just the opposite of what you went through to buy the policy. Now it pays to be older and in poorer health. If your policy has cash value and the remaining premium payments are relatively inexpensive, you might get as much as 40% of your policy's face value as a cash settlement.

So, if you have an insurance policy that is at least two years old and still in force, consider selling it and receiving cash now. The lump sum you receive from a Senior Settlement sale of a life insurance policy may well improve the quality of your life in the here and now. If you are interested in learning more about Senior Settlements, let us know. Senior Savvy will mail you additional information to see if you have a policy that might qualify.

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