The Value of l.i.f.e.
There are many reasons why a life insurance policy can become unneeded. Among them:
- Beneficiaries no longer require the protection
- Loans secured by a policy are repaid
- Key executives retire
- Businesses are sold or closed
Or a policy may become unwanted. A few of those reasons might be:
- Estate tax concerns have been reduced
- The policyowner wants to change policies
- Policy premiums have become too expensive
Whatever the reason, that policy stills represents a considerable asset that should not be overlooked or undervalued.
For most of the history of life insurance, and still believed by many, the owner of an unneeded or unwanted policy had two options — sell/surrender the policy back to the institution that issued it for its cash surrender value (if any) or allow the policy to lapse.
However, there is a main stream, accepted, third alternative: a Life Settlement.
Life Settlement is the sale or assignment of a life insurance policy to a financial institution for a lump sum cash payment.
The buyer of the policy becomes the policyowner, assuming the responsibility for paying future premiums and also becoming the policy’s beneficiary.
Considering a life settlement as an option is a prudent choice as a 2006 study concluded that "Last year, for instance, insurance companies reduced their financial exposure by $1.1 trillion when 19.8 million policyholders stopped paying premiums, according to the Insurance Information Institute. In comparison, the industry paid death benefits on only 2.2 million policies."*
Using a knowledgeable and independent expert to access this secondary market is also an intelligent choice.
Maximizing value — a fact of l.i.f.e.
*The New York Times "Late in Life, Finding Bonanza in Life Insurance" 12/17/2006
