There are many situations where a policy owner, especially those focused on retirement, may wish to appraise and sell their life insurance policy for a cash settlement to fund lifestyle and caregiving needs. The most common occurs when the consumer makes a decision to stop paying the premiums on the policy and turns toward their advisors to consider all viable options. Many times these retirees or their adult-children, that are acting as caregivers, are searching for ways to pay for living expenses and medical needs. Their objective is to make an informed decision, maintain dignity throughout their retirement years, and reduce increasing debt for themselves or their loved ones throughout the process. Another reason may include that the policyholder owns multiple life insurance policies and wishes to eliminate one to generate immediate funds to pay the premiums for the remaining policies.
For example, a 74-year-old business owner was retiring and no longer wanted to fund the premiums for a $500K Term policy or a $750K Universal Life contract. They were able to sell the Term policy for $150K and use those proceeds to maintain the remaining $750K policy.
Prior to the emergence of the Secondary Market, policy owners didn’t have this option available to them when surrendering or letting their policy lapse. While traditional exit-strategies can be appropriate choices in certain circumstances, the potential for a policy to be sold for its fair market value on the Secondary Market can generate immediate cash flow, making it an attractive alternative for advisors and their clients.
If your client is in a position where you think it would be prudent to consider alternatives, talk to a secondary market specialist. You can also visit https://ashargroup.com/policy-value-questionnaire/ to take the first steps in determining if a policy may qualify for a life settlement.
