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.
Until recently, 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.
Now however, there is a third alternative: 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
