7 Reasons to Consider a Life Settlement

There are many reasons to consider a life settlement. Seniors are utilizing their stagnant life insurance policies to provide them with extra cash. It could be a life saver for you and your finances in retirement. It is an investment worth asking your financial advisor about. 

Decrease Debt

The number of seniors that have debt in retirement is rising. In 2019, the Congressional Research Report found that the amount of debt in seniors ages 65 and older increased by over 20% in the past 30 years.

While the time period may seem strained, it reveals an alarming number of seniors struggling in retirement. Debt prevents seniors from living a fulfilling retirement.

Finding the cash in a retirement budget to pay for the unexpected additional debts accumulated can be difficult. A life settlement can provide the cash needed to pay off credit card debt and more so there is less worry and stress. 

Eliminate Increasing High Premiums 

Premiums are what you pay month to month to keep your life insurance coverage. It can turn out to be an extra expense on top of priorities that are not always necessary.

The payout from the premiums that you pay over the years, referred to as a death benefit, is often not needed anymore by the policyholder. A life settlement rids you of the policy altogether and still allows you to get a significant amount of money out of it, rather than to lapse the policy and not receive anything.

If premiums begin to be a burden on your life, they can free up some much-needed cash. 

 Asset in Economic Downturn

While retirement is well sought after for many people, it can be unpredictable. You can only prepare for so many things in life until the unexpected happens.

This is especially true with the investment and stock market, for example. The recent downturn of the market due to Covid, for example, left many people stripped of their retirement savings and left to start over. For those who were already deep into retirement and without a source of income to recover, it was it.

Suppose it was difficult to find an alternative. If you find yourself in a bind and without the extra cash to suffice, a life settlement can serve as a form of income or financial replacement. 

Filling the Gaps

Many baby boomers were not as prepared for retirement as they should have been. In 2019 the U.S. Government Accountability Office estimated that nearly 50% of people 55 and older did not have adequate retirement savings.

Having limited financial resources within retirement is what has forced many retirees back into the workforce. A life settlement can provide a source of cash to support long-term goals and fill gaps in retirement where seniors may not have been prepared. 

Cover Rising Health Care Costs

It is no secret. The cost of healthcare is rising, and people have to find alternative ways to pay medical expenses, doctor bills, prescriptions, and more.

Even one doctor’s visit can be overwhelming, and there are not many options for people who have a strict budget but still don’t qualify for Medicaid. Health should be a priority.

No one should go without access to health care. A life settlement has proved to provide funding for seniors to cover these expenses. It is even helpful in paying for long-term care.

Help Your Business

Many seniors retire with a business still in operation. Sometimes, in order to keep that business going, additional funds are needed.

In other cases, it may be more beneficial to sell the company, in which case the insurance policies are in place to protect assets within the business.

In addition, once the business is sold, the insurance policies on those assets can be sold as well, providing more cash from the sale of a business than you may have originally intended. 

Help With Life Transitions

Life continues after retirement; sometimes even a new chapter in life can begin for some. A life settlement can help in some of those life transitions, such as a growing family or education for loved ones.

Divorce is another major expense that senior couples are facing in retirement. Recent studies show that people aged 60 and older are divorcing at the highest rate in comparison to other groups, and it costs thousands of dollars. Whatever the case may be, a life settlement can get you the cash you need to move on. 


Life settlements are becoming an increasingly popular option for seniors. While many do not know enough about the process yet, it is still valuable to know that your life insurance policy is an asset.

Whether you want to keep your policy intact or you need to collect its worth in cash, it is an investment worth having. In addition, life settlements are an alternative solution for many seniors with the right qualifications. 

Life Insurance Settlements can help you find out if you are eligible for the sale of your policy, call one of our settlement broker professionals today and begin by getting your policy appraised. 

Combating Inflation with Life Settlement Earnings

 Oct 13, 2021 

Everything is getting more expensive these days. Gas prices are higher, food prices are higher, used car prices are higher—it seems like nothing right now is immune from the effects of inflation. And it’s not going away anytime soon.

Inflation Hits Its Highest Point in Thirteen Years

In the twelve months ending in July, 2021, the U.S. experienced a 5.4% inflation rate, up from 1.4% the year prior, and far above anything in the last ten years. It’s the highest rate we’ve reached in thirteen years, when the Great Recession in August 2008 saw 5.4%. The financial experts at Kiplinger predict that this will continue through year’s end, and start to drop in 2022. But it will remain a heightened concern: “Expect inflation in 2022 to ease to 3% as shortages ease, but this will still be higher than the 2% average from 2016-19, prior to the pandemic. In short, stronger inflation is likely to stay with us for a while.”

Source: U.S. Inflation Calculator

  

Monthly 12 month inflation rate in the U.S. From July 2020 to July 2021

Source: Statista

 

Baby Boomers especially remember the woes of inflation, when gas shortages in the 1970s forced them to wait in long gas lines winding around stations. They are wary of what this might mean as they near retirement—and for their ability to fund it securely.

While it’s important for people to rethink their buying behavior to offset inflation’s effects, it’s also a good time to take a look at the other end of the equation—investments and other income generators. Many life insurance policyholders have a valuable asset in their life insurance, but don’t realize that it can be leveraged to counteract the effects of inflation. In fact, only 50% realize that their life insurance can be sold for cash. And a draw dropping 92% of life insurance policies end without paying out a death benefit, since they were surrendered or lapsed. As a financial professional with the fiduciary duty to protect your client’s best financial interests, it's incumbent on you to let them know about life settlement advantages. In fact, if you work for a life insurance company in these six states, it’s required by law. 

Life Insurance Policies Are Life Assets

Since the sales of life insurance policies are not tied to the stock market or the economy, they are a smart way to counteract the effects of inflation. You can help your clients bolster their financial picture in retirement by showing them the benefits of selling their policy. They can avoid increasing premiums and recoup more than they would if they let their policy lapse or were forced to surrender it. Since they would receive a lump sum, they could use a portion to handle rising everyday costs and most likely still have enough to invest in other goals, whether they’re helping to fund college educations for grandchildren, paying off debt, getting medical help or using that freed up cash for whatever important need they have.

Since so many people don’t realize that their life insurance policy is a financial asset, learning this is like found money right under their noses, especially when they haven’t given a second thought to their policy in years. You would do them a service by having their life insurance policies appraised.

Steps to Selling a Policy

As you’re aware, there are a number of steps involved in appraising a policy and selling it, and you can make it easy for your client by spelling them out ahead of time. Succinctly, they are:

Life and viatical settlements are very straightforward. With a little bit of preparation, they can yield surprisingly lucrative returns. Now is a great time to talk to your clients about tapping these valuable assets, as the concern for inflation grows greater. By maximizing an asset your client already has, you can help them stay ahead of the increases and enjoy a more comfortable retirement, even as the world gets more expensive.

How Did Insurance Policy Owners Earn $848 Million in 2020?

 Oct 6, 2021  

Why Was There an Increase in Life Settlements?

There are a couple of reasons that point to this rapid increase. First, more people are becoming seniors, as the large baby boomer generation reaches that milestone. Second, policyholders are recognizing how lucrative life settlement earnings can be. The report noted that the average sale in 2020 was 20% of the policy’s value; but some sellers reported earning as much as 52.8% of the face amount. Like real estate, policies are garnering unheard of returns.

And there is room for growth. An astounding 92% of life insurance policies end without paying out a death benefit, meaning they were surrendered or lapsed due to an inability to pay or disinterest in paying the premiums. This is leaving significant amounts of money on the table. In fact, it’s more than $100 billion. 

This trend is expected to continue. Forbes tells us that by 2030, Americans age 65-plus will comprise 21% of the population; in 2019 that number was 16%. Additionally, continued inflation worries [link to inflation blog]and possible tax increases might drive retirees to tap unwanted life insurance policies for cash. Finally, since the life settlement returns are not tied to the economy or the fluctuating bond and stock markets, many investors see it as an alternative asset class with the potential for higher returns.

What Were Policy Owners’ Motivation to Sell?

There are a number of reasons why these policy owners sold, and they continue to be strong motivating factors for the future. Many recognized that eliminating the high premium payments is a smart financial move that frees up their cash flow. Additionally, they realized that they’ll receive much more money than the cash surrender value—and of course more than zero, which is what they would receive by allowing the life insurance policy to lapse.

Their needs ranged from wanting to help with grandchildren’s education, to paying for a new home, to funding long-term care, to covering medical costs, to helping with a divorce, to taking trips, to purchasing other investments, to overcoming bankruptcy, to donating for a cause, to eliminating debt and many more. Some couldn’t afford the premiums and wanted to avoid a lapse. Some wanted to free themselves from policies that were no longer relevant or needed. The bottom line is that they recognized that their life insurance policy was an important asset that they could leverage.

 

Tight Life Settlement Regulations Drove Growth in the Industry 

Another important factor that motivated policyholders to sell are the increasingly tight state regulations governing the life settlement industry. Since the recession of 1988 and the ensuing financial fallout, financial regulation has increased across all sectors. In the life settlement industry, this has benefited the policyholder in many ways. In fact, approximately 90% of the U.S. population is protected by comprehensive life settlement laws and regulations—one of the most strictly regulated financial transactions in most states now.

Some life settlement regulations requirements include:

With this much momentum in the industry, it makes good sense for policyholders 65 and older to consider a life settlement. Since it is in their best interest in many instances, we encourage you to have that conversation with your clients as well.

Life Settlement Cases with Interesting Outcomes


 Life Insurance settlements should be viewed as an alternative to a lapse or surrender of a life insurance policy. For example, a settlement  could open up the possibility for much needed Long-Term Care.  Frequently, an infusion of cash makes a meaningful difference not only to the policy owner, but also, to loved ones at a critical time in their life. Here are several cases that illustrate how a Life Insurance Settlement helped seniors through a stressful period.

 

- Male, 91, with a $982,136 John Hancock Guaranteed UL policy and a life expectancy of 65 months.  On 8/29/2019, the initial offer was $325,000. It was bid up several times (three funds were interested) and on 10/25/19, the final offer received was $414,000. On 10/29/19, the client declined the offer and decided to keep the policy as he wanted a higher amount ($10,000 more!). On 1/6/2020 we got a call from the broker that the client changed his mind and wanted to accept the offer. We went back to the fund with the highest offer and, unfortunately, we were told that the offer was no longer available. We then went back to all the funds and this time, the best offer that we could get was $350,000. On 1/23/20, the client again declined the offer and decided to keep the policy. What makes this case interesting to note is that timing is everything! Funds available for investment don’t remain idle and move on to other policies. 

 

- Male, 67, with a $2,000,000 Transamerica term policy and a life expectancy of 196 months.  The policy owner received $31,147. What makes this case interesting is that although $31,147 is only 1.5% of the face amount, the client was thrilled to get the cash as opposed to lapsing the policy and getting zero!

 

- Male, 77, in great health with a $1,000,000 John Hancock GUL policy.  Seller received $106,783. What makes this case interesting is that we were able to get an offer just based on the guaranteed premiums to age 105. Because he was in such good health, medical records weren’t needed! Guaranteed UL and Guaranteed Survivorship UL contracts on healthy people in their mid 70's and up can have surprising value in the life settlement market.

 

- Female, 91, with a $2,000,000 Jackson National UL policy and a life expectancy of 38 months.  The insured had already tried to sell this policy about a year and a half prior. At that time, her life expectancy was 77 months and the highest offer was $250,000. The family decided to keep the coverage and try to continue paying the premiums. But a year and a half later, the family determined that, although their mother's health had deteriorated, they could no longer afford the premium payments and they needed money for their mother's care, back bills, etc. This time the highest offer was $795,000. What makes this case interesting is that, in the interim, the insured's health had gotten much worse and, although it seemed to make even more sense to hold on to the coverage, it was simply unaffordable. The money was a huge source of relief to the family.

GRIGSBY v. RUSSELL

United States Supreme Court

GRIGSBY v. RUSSELL(1911)

No. 53

Argued:Decided: December 4, 1911

Messrs. Montague S. Ross, John A. Pitts, and K. T. McConnico for petitioner.

[222 U.S. 149, 153]   Mr. George T. Hughes for respondents.

[222 U.S. 149, 154]  

Mr. Justices Holmes delivered the opinion of the court:

This is a bill of interpleader brought by an insurance company to determine whether a policy of insurance issued to John C. Burchard, now deceased, upon his life, shall be paid to his administrators or to an assignee, the company having turned the amount into court. The material facts are that after he had paid two premiums and a third was overdue, Burchard, being in want and needing money for a surgical operation, asked Dr. Grigsby to buy the policy, and sold it to him in consideration of $100 and Grigsby's undertaking to pay the premiums due or to become due; and that Grigsby had no interest in the life of the assured. The circuit court of appeals, in deference to some intimations of this court, held the assignment valid only to the extent of the money actually given for it and the premiums subsequently paid. -- L.R.A. --, 94 C. C. A. 61, 168 Fed. 577.

Of course, the ground suggested for denying the validity of an assignment to a person having no interest in the life insured is the public policy that refuses to allow insurance to be taken out by such persons in the first place. A contract of insurance upon a life in which the insured has no interest is a pure wager that gives the insured a sinister counter interest in having the life come to an end. And [222 U.S. 149, 155]   although that counter interest always exists, as early was emphasized for England in the famous case of Wainewright (Janus Weathercock), the chance that in some cases it may prove a sufficient motive for crime is greatly enhanced if the whole world of the unscrupulous are free to bet on what life they choose. The very meaning of an insurable interest is an interest in having the life continue, and so one that is opposed to crime. And what, perhaps, is more important, the existence of such an interest makes a roughly selected class of persons who, by their general relations with the person whose life is insured, are less likely than criminals at large to attempt to compass his death.

But when the question arises upon an assignment, it is assumed that the objection to the insurance as a wager is out of the case. In the present instance the policy was perfectly good. There was a faint suggestion in argument that it had become void by the failure of Burchard to pay the third premium ad diem, and that when Grisby paid, he was making a new contract. But a condition in a policy that it shall be void if premiums are not paid when due means only that it shall be voidable at the option of the company. Knickerbocker L. Ins. Co. v. Norton, 96 U.S. 234 , 24 L. ed. 689; Oakes v. Manufacturers' F. & M. Ins. Co. 135 Mass. 248. The company waived the breach, if there was one, and the original contract with Burchard remained on foot. No question as to the character of that contract is before us. It has been performed and the money is in court. But this being so, not only does the objection to wagers disappear, bur also the principle of public policy referred to, at least, in its most convincing form. The danger that might arise from a general license to all to insure whom they like does not exist. Obviously, it is a very different thing from granting such a general license, to allow the holder of a valid insurance upon his own life to transfer it to one whom he, the party most concerned, is not afraid to trust. The law has no [222 U.S. 149, 156]   universal cynic fear of the temptation opened by a pecuniary benefit accruing upon a death. It shows no prejudice against remainders after life estates, even by the rule in Shelley's Case. Indeed, the ground of the objection to life insurance without interest in the earlier English cases was not the temptation to murder, but the fact that such wagers came to be regarded as a mischievous kind of gaming. Stat. 14 George III., chap. 48.

On the other hand, life insurance has become in our days one of the best recognized forms of investment and self-compelled saving. So far as reasonable safety permits, it is desirable to give to life policies the ordinary characteristics of property. This is recognized by the bankruptcy law, 70,1 which provides that unless the cash surrender value of a policy like the one before us is secured to the trustee within thirty days after it has been stated, the policy shall pass to the trustee as assets. Of course, the trustee may have no interest in the bankrupt's life. To deny the right to sell except to persons having such an interest is to diminish appreciably the value of the contract in the owner's hands. The collateral difficulty that arose from regarding life insurance as a contract of indemnity only (Godsall v. Boldero, 9 East, 72), long has disappeared ( Phoenix Mut. L. Ins. Co. v. Bailey, 13 Wall. 616, 20 L. ed. 501). And cases in which a person having an interest lends himself to one without any, as a cloak to what is, in its inception, a wager, have no similarity to those where an honest contract is sold in good faith.

Coming to the authorities in this court, it is true that there are intimations in favor of the result come to by the circuit court of appeals. But the case in which the strongest of them occur was one of the type just referred to, the policy having been taken out for the purpose of allowing a stranger association to pay the premiums and receive the greater part of the benefit, and having been assigned to it at once. Warnock v. Davis, 104 U.S. 775 , 26 L. ed. 924. [222 U.S. 149, 157]   On the other hand, it has been decided that a valid policy is not avoided by the cessation of the insurable interest, even as against the insurer, unless so provided by the policy itself. Connecticut Mut. L. Ins. Co. v. Schaefer, 94 U.S. 457 , 24 L. ed. 251. And expressions more or less in favor of the doctrine that we adopt are to be found also in AEtna L. Ins. Co. v. France, 94 U.S. 561 , 24 L. ed. 287; Mutual L. Ins. Co. v. Armstrong, 117 U.S. 591 , 29 L. ed. 997, 6 Sup. Ct. Rep. 877. It is enough to say that while the court below might hesitate to decide against the language of Warnock v. Davis, there has been no decision that precludes us from exercising our own judgment upon this much debated point. It is at least satisfactory to learn from the decision below that in Tennessee, where this assignment was made, although there has been much division of opinion, the supreme court of that state came to the conclusion that we adopt, in an unreported case,-Lewis v. Edwards, December 14, 1903. The law in England and the preponderance of decisions in our state courts are on the same side.

Some reference was made to a clause in the policy that 'any claim against the company, arising under any assignment of the policy, shall be subject to proof on interest.' But it rightly was assumed below that if there was no rule of law to that effect, and the company saw fit to pay, the clause did not diminish the rights of Grigsby, as against the administrators of Burchard's estate.

Decree reversed.

Mr. Justice Lurton took no part in the decision of this case.

Term Policies Make Good Life Settlements


Term policies that are convertible to universal life make some of the best prospects for a life settlement, but they are frequently overlooked.

This opportunity is missed for primarily two reasons: first, term life settlements are time-sensitive transactions that must occur before the policy lapses or the conversion privilege expires and, second, many financial advisors, accountants and attorneys are not aware that term policies can be sold in a life settlement.

(Related: Don’t Allow Term to Lapse Without Taking a Second Look)

Here are some recent life settlement cases that produced unexpected cash from term policies:

1.     A retired 75-year-old male with a $1 million term policy could not afford to convert the policy that was nearing the end of its guaranteed premium and conversion periods. His health was fairly good for his age, but he was a cancer survivor and had a life expectancy of about 12 years. Since he wanted to keep some coverage in force, he was planning to convert a small portion of the policy, $100,000, and let the balance of coverage lapse. We were able to get him $28,000 in a life settlement by converting and selling $800,000 of the policy. He was able to convert and retain the $200,000 balance of the policy for himself. The proceeds of the life settlement covered over two years of the conversion premium which allowed him to keep a larger amount in force for himself than if he had simply allowed the policy to lapse.

2.     A seriously ill 51-year-old male was diagnosed with a cancer that was likely to take his life within five years. He was burdened by debt and limited income, but also wanted to enjoy his final years, needing additional cash to do things with his family. Fortunately, he owned a $2 million term insurance policy. He kept $1,000,000 of the policy for his wife and children, and sold $1,000,000 of the policy which enabled him to obtain enough cash to meet his objectives. His life expectancy came in at 4½ years and we were able to get him an offer of $670,000. The proceeds will obviously make a significant difference during the short time remaining to him.

3.     A 67-year-old with heart issues, but a rather long life expectancy of 18 years, was retiring. There were two $1 million term policies on his life that were being paid for by his employer. One was a key person policy and the other a fringe benefit. Upon retirement, the policies were no longer needed or affordable, but he wanted to retain and convert $100,000 for his final expenses. Instead of letting the $1.9 simply lapse, we were able to sell that portion of the coverage for $19,000.

4.     A 75-year-old owned two term policies totaling $750,000 in face amount that he was going to allow to lapse. Fortunately, his agent became aware of his plans before they happened. He had non-Hodgkin’s lymphoma in remission and his life expectancy was 10 years. By combining and converting the two policies we were able to get him $187,000 in a life settlement.

Had these clients’ agents not been vigilant and in the know, these cash windfalls might never have happened. It is up to you to be sure that your clients and their advisors don’t miss the opportunity to sell their expiring term insurance policies.

The Difference Between Viatical and

Life Settlements

People choose to sell their life insurance policies when they find that the policy is no longer wanted, needed, or can no longer be afforded. When it comes to life settlements and viatical settlements, choosing the appropriate route is not always as easy as it may seem. Life insurance policies carry a cash value with them in which you can sell to a third party buyer in return for monetary funds. In situations when individuals no longer want or can afford their policy, many times, they will simply let their life insurance policy lapse. All those years of paying into the policy will reap no return for the policyholder, and large sums of money will be lost.

Viatical Settlements vs Life Settlements

So what is the difference between viatical settlements and life settlements? Both of these methods involve selling a life insurance policy and while they are similar, they do vary slightly.

A viatical settlement is the sale of an existing life insurance policy at a discount form its value for cash. This type of settlement is offered when the insured is terminally ill — designed specifically for those who have a two to four-year life expectancy. If an individual knows they will have costly medical bills that need to be taken care of upon their death, they will invest in a viatical settlement to ensure that their family is not left with the financial burden of paying off those bills. The idea is that the money the terminally ill gets from the settlement is to go towards medical expenses during this two to four year period. Since viatical settlements are based on the speculation of death, it’s essential that potential policyholders fully comprehend the basics of viatical settlements in relation to their current situation. Due to the time value of money, the longer the life expectancy rate, the cheaper the policy will be, and the longer an individual lives, the lower the return is. Due to this, it’s highly important that you invest your time with a viatical settlements company that’s both reputable and has your best interest at heart.

A life settlement is a trade between the policyholder and the purchaser. This type of settlement is designed for those with longer life expectancies. Life settlements are designed for those with longer life expectancies. Life settlements are fantastic as they allow the policyholder to obtain cash for an unwanted or unaffordable life insurance policy. In turn, they get to enjoy financial relief and have the option to spend the funds however they choose to. The benefit to selling a life insurance policy in the event of retirement or old age is that the insured will obtain significantly more money than if they were to simply surrender the policy or allow it to lapse.

When A Viatical or Life Settlement Makes Sense

There are several instances in which a viatical or life settlement might make sense for you:

Always consider your options and don’t simply let your life insurance policy expire or agree to the surrender value that insurance companies offer you. As a reputable life settlements and viatical settlements company, we can assist you in obtaining the most cash out of your life insurance policy. Maximizing the value of your life insurance policy will allow you to turn your unwanted policy into money that you can put towards vital expenses and quality of life.