It’s not uncommon that policies issued years ago can outlive their original purpose. There are also times when more modern products are available. Situations such as nearing the end of a conversion period for Term policies, or the challenges of underfunded policies, may result in a senior exploring the life settlement option. The uncertainty of the equity markets, combined with savings at an all-time low has also brought insecurity to this proud generation. This has caused families to consider alternative ways to care for their loved ones, such as selling their life insurance policy as a short-term liquidity solution. Here are other reasons life settlements have become a valuable option for seniors:
1. The need for liquidity makes unneeded or unaffordable life insurance policies an attractive source of found money. Seniors can sell their policy for a higher amount then the cash surrender value, but less than the death benefit, giving them additional income to fund emerging needs such as healthcare and retirement needs
2. The reduction in estate tax liability resulting from ATRA 2012 is causing some senior clients to reconsider the amount of life insurance coverage that they really need. The secondary market has evolved to provide some attractive solutions to allow a partial sale of some of the benefit allowing the policy owner to retain a portion of the policy with no future premium payments.
3. Increasing costs of insurance premiums at a time of mounting healthcare costs may make the opportunity cost of holding a policy an unwelcome burden. Selling the policy for fair market value allows policy premiums and proceeds from the sale to be redirected to changing planning needs.
4. Parents that bought policies as a safety net in case of a spouse’s death may now have grown children that are financially independent. The policy is no longer an effective safeguard, and becomes a burden and a financial drain instead of a source of security. Uncovering the hidden value in this life asset could be a game changer and allow funding for other areas of their retirement plan.
5. In the case of a business, a policy is no longer needed because the business has been sold or liquidated. Term, Key-person, Buy/Sell, and others are lapsed for pennies on the dollar that could possibly be worth more than the business itself.
The Ashar Group serves as a strategic partner and specialist in the Secondary Market for Life Insurance Settlements. For more information, please visit www.ashargroup.com