Due to a relatively new concept, called a Life Settlement, life insurance policies that are no longer wanted, needed or affordable may have greater value than their cash surrender value. In a life settlement transaction, investors purchase life insurance policies from policy owners who are about to lapse or surrender their contracts. After the sale, the investors continue to pay the premiums and own all the rights, benefits and death proceeds from the policies. The policy owners, instead, get an immediate cash payment that exceeds the surrender value of the policy.
What policies qualify? Although there are no specific rules, here are some general guidelines:
- Universal life and term insurance convertible to universal life with a face amount of $500,000 or higher are the best prospects.
- The insured is around age 70 or older.
- There has been some decline in health since the policy was issued. The younger the insured the greater the health impairments needed.
- The policy is about to be lapsed or surrendered. A life settlement is usually not a good alternative to keeping a policy.
There is no obligation to accept any offer. So, if you have a policy that is no longer needed and you fit the criteria, it could be very worthwhile to let us review your policy to see if it could bring you additional value as a life settlement.
By: Robin S. Weinberger, CLU, ChFC, CLTC and Peter N. Katz, JD, CLU, ChFC