American Chronicle
By: Amy Gavartin
ADVISERS ARE CONSTANTLY LOOKING FOR ways to supplement the depleted finances of their clients. For seniors, one option that has become more popular is the secondary market for life insurance or life settlements. Several articles have recently been published on this topic, and many have tried to portray this industry as the “next subprime crisis” waiting to happen but gloss over the underlying fact that the use of life settlements has uncovered vast amounts of hidden value from existing life insurance policies. Over the past 10 years, owners of life insurance policies who have chosen to sell have received approximately $6-7 billion more than their cash surrender value (CSV) (Thomas, “LISA Pans Article,” Life and Health Insurance News (September 14, 2009). It is not uncommon for the settlement amount to be three to five times the CSV, and the policy owner is relieved of all future premium payments on the policy. All types of policies are eligible for a life settlement, including term, universal life, whole life, variable universal, and second-to-die policies. The general rule of thumb in today’s market is that the insured should be over age 70 with a minimum of $250,000 of insurance.
Commentary by Life Policy Group:
An article which balances some of the more negative news stories about life settlements.