By Lisa Rehburg of Rehburg Life Settlements
The short answer is because sometimes people no longer need the policy, no longer want it, or can no longer afford it. But, there is more to it than that.
The numbers are staggering. 2.5 million seniors a year will walk away from their life insurance policies – with little to nothing. This translates to over $100 billion in face value…that’s billion, with a “b”…that seniors are giving up each year. Surveys have shown that 90% of seniors who have let a policy lapse would have considered selling it, had they known that was an option.
Life insurance policies, any type of life insurance policy, are an asset. As an asset, they can be sold. The process is called a life insurance settlement. What is a life insurance settlement, you ask? Simply put, it is the sale of a life insurance policy to a third party (usually an investor group) for more cash than any cash value or surrender value in the policy (even term policies can be sold). The investor group then becomes the new owner, continues to pay the premiums, and receives the benefit when the insured passes away. The benefit to the client is that they receive a lump sum payment that is 5 – 6 times greater, on average, than the surrender value of the policy. Typically, the best candidates for life insurance settlements are clients 65 years or older with a policy face amount of at least $100,000, but this is just a guideline.
Each client is unique, and the reasons they have for selling their life insurance policies vary, but in each case, the client no longer needs or wants their policy. The most common situations include:
-A term policy that is nearing the end of the policy term;
-The policy may becoming too expensive to maintain;
-A policy purchased to cover estate taxes is no longer needed now that the estate tax exemption has doubled;
-A client may have retired, and with mortgages paid off and kids through school, no longer needs the coverage;
-A business owner sold a business and no longer needs the “key person” coverage;
-One spouse may have passed away, leaving the other with no need for life insurance;
-A client is trying to find ways to pay for long term care needs, such as assisted living, home care, etc.
And more…
The reality is that a life insurance settlement may be a good option if life circumstances have changed and the reason the policy was originally purchased is no longer a concern. The money a client receives can be used for anything, but can be a good way to pay for long term care expenses, supplement retirement, give to charity, take that long awaited dream vacation, etc.
Furthermore, life insurance settlements have been legal since 1911 and are highly regulated by Departments of Insurance across the country. I am a life insurance settlements broker with a fiduciary duty to clients to market their policy to many different buyers, to obtain the most amount of money for the policy. Not only am I regulated, which is good, but even better, the buyers are regulated as well and have to be approved to purchase policies in a particular state.
If you are an advisor that works with seniors, helping them sell a life insurance policy can be good for your business as well. After all alternatives have been considered, and it is determined that the policy is going to be lapsed or surrendered, a life insurance settlement can offer a significantly greater value. The evaluation of a life insurance policy is free of charge and clients are under no obligation to take any offers received. We’re here to help!
-Lisa Rehburg
Rehburg Life Insurance Settlements is a life insurance settlements broker, and helps people benefit from their unwanted or unneeded life insurance policies. By having access to many investor groups, Rehburg Life Insurance Settlements can place more policies and realize a better return for clients. Lisa has been licensed for over 35 years. She can be reached at (714) 349-7981, lrehburg@aol.com, or lisa@rehburglifesettlements.com. Website: www.rehburglifesettlements.com.