Life Insurance Settlements – a Primer

Life insurance is one of the most common financial products in most Americans’ lives, and possibly one of the most misunderstood.  

A 2018 estimate placed over 138 million policies based on the lives of individuals in the US, to a total value of $12.12 Trillion. Group policies can add some $7.36 Trillion to that figure.  

While all of this intends to ensure the financial security of American families, interestingly, about 90% of them lapse before any claim is paid. If an improved level of financial literacy is needed in this country, an excellent place to start is with a Life Insurance Settlement.

Regardless of how the situation looks on the surface, many mature policies actually have some intrinsic economic value left in them. So don’t be one of the many life insurance policyholders who walk away from these valuable instruments each year. These are investments you’ve already paid for!

Life Settlement Investments

Too few consumers know about the secondary market for these policies, regulated by the state: they’re called Life Settlements. Life Settlements can give life insurance customers a new option regarding their policies, a choice not usually discussed by their insurance agents.

Some states license specific financial institutions (including some of the significant world-class players in the financial industry) to buy late-term life insurance policies. In much the same way as one looks at selling a house, car or other high-value belonging, qualified policyholders can sell their policies to these financial institutions. The institution then takes ownership of all rights, title and future interest in the life insurance policy, including the onus to make future premium payments. This creates a secondary market to which people can turn if they experience a drastic change in life circumstances or a reduced capability to pay further policy premiums. Policyholders can now realize the fair market value of their policies rather than watch their assets diminish in value to nothing, or give them up for a fraction of their worth.

This solution places the life insurance policy on an equal legal footing with many traditional investment instruments, such as real estate, stocks and bonds. And like these investment properties, the Life Settlement industry is highly regulated by state agencies, requiring that brokers and providers are licensed and that strong consumer protections are in place.

The Value of a Life Settlement

Thousands of Americans have taken advantage of this process over the last few decades. According to a Life Settlement Study conducted by the US Government Accountability Office, between 2006 and 2009, Life Settlement consumers recovered $5.62 Billion more than would have been possible without this solution. That’s 800% more value-added.

It’s really a win-win situation.

Over the years, life insurance policyholders will have built up considerable equity in their policy, and if difficult financial circumstances impede on their ability to pay premiums and they let the policy lapse, or surrender the policy for a token settlement, most if not all of this equity could be lost.

While some states have regulated that life insurance carriers must notify consumers about the alternative solutions to lapsing or surrendering a life insurance policy that are available, including the life settlement process, most consumers remain unaware of this option.  And what you don’t know could come back to hurt you. 

Who Qualifies for a Life Settlement?

Qualifying policyholders include those over the age of 65 with chronic health conditions and younger insured people who may encounter severe or end-stage health issues. Possible reasons for considering a Life Settlement include: continuing payment of policy premiums is no longer feasible, the original beneficiaries are no longer present, or if the policy’s value would grant the policyholder funds for badly-needed medical care. 

A Life Settlement is not always the optimum solution. If the policyholder or the family can continue paying the premiums, allowing the life insurance policy to mature naturally may be the best course of action for the consumer. Such a decision should always be discussed with the insured’s family, a qualified financial advisor, and the issuing life insurance company to determine what is best for the customer.

There should not be any out-of-pocket fees to request a Life Settlement offer, and there should never be an obligation to sell one’s life insurance policy. The cash payout of selling one’s policy may be taxable under certain circumstances, so it would be wise to make inquiries of the state and federal tax authorities about this process.

A Life Insurance Settlement remains a solid, sensible, and possibly life-changing choice for many Americans. For more information on this solution, contact the experts at Life Insurance Settlements. Visit www.lisettlements.com or phone 1.866.326.5433 to find out what options you might be able to take advantage of when it comes to your life expectancy. They’ve helped many people just like you.

Rob HaynieOctober 20, 2021

Rob Haynie

Mr. Haynie has been a major influence on the evolution of the life settlement industry during his almost twenty-seven year career of proactive involvement. Not only has he been directly involved in negotiating and settling several thousand contracts, he also presently serves on the board of directors of the Life Insurance Settlement Association (LISA) and is a charter member of the Association’s PPC committee, which is charged with the regulatory and legislative activities of the industry. Additionally, he has served on both the Customer Advisory Board (CAB) of ITM/TwentyFirst Services and the Advisory Board of the Insurance Studies Institute (ISI). He was named one of the top 10 most influential people in the life settlement industry worldwide. Mr. Haynie, an Alumnus of Florida State University, currently holds a Life Agent License with Viatical Settlement Broker Appointment for LIS and has spoken at almost every life settlement industry meeting or conference, published articles on the subject and has given many educational webinars as well.

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