Rare is the instance when a product or service delivers more than expected. Rarer still is when the return on investment is beyond expectations, especially in a recessionary market. Yet news out from the federal government has shed new light on the inherent value of the life settlements market.
The United States Government Accountability Office of the federal government has taken an interest in the life settlements market recently, releasing a report outlining the current life settlements market, regulatory challenges, and recommendations going forward. The news was intriguing – life settlement companies surveyed reported that on average, consumers receive nearly eight times the surrender value of their life insurance policy in a typical life settlement agreement. For life insurance policy holders looking to find value in a stagnant market, the news couldn’t come at a better time.
In a tight financial market, consumers are looking for ways to cut costs. Also, those things that were once affordable have become a strain on the budget. The life settlement market has offered an alternative to cashing in a life insurance policy or worse, allowing it to lapse, which causes policy holders to lose all their premium investment. Because the return for those selling a policy in the life settlements market is so high, policy holders can not only alleviate a costly premium payment, but also bring in additional cash when it’s most needed to pay for long term care insurance.
That said, life insurance policy holders should not take the decision to sell their policies lightly. You as a policy holder need to understand how the sale could affect you:
- Prices are not guaranteed. Just because today’s life settlement market is bringing a large return does not mean your policy will fare the same. By and large, such settlements will net you a greater return than surrender, but many factors determine price on the life settlement market. Review your policy with a life settlement broker to understand what to expect.
- Getting more life insurance later is not always possible. Nearly 35 percent of all life insurance policies sold lapse. Insurance companies do not look favorably on life settlement deals because a policy that doesn’t lapse costs them money. Some insurers have begun to deny coverage to customers who have sold a policy in a life settlement deal. If you need life insurance coverage, talk over your options with a life settlement broker.
- You’re selling your death benefit. As a policy seller, you should understand what it is you’re selling. Your sold life insurance policy stays in force and still covers your life. However, the death benefit no longer belongs to you or your beneficiaries. Your sales price transfers the death benefit to the policy buyer.
Smart policy holders will review carefully their life settlement options with a qualified life settlement broker. The more you understand your rights and your options in a life settlement deal, the more likely you’ll make the smart choice that fits your lifestyle.