As life settlement brokers, we know that seniors age 65 and older are leaving huge amounts of money on the table in lapsed and surrendered life insurance policies. That’s why we work so hard with financial advisors to help seniors sell their life insurance policies. A life settlement can provide much needed liquidity for some of life’s most burdensome expenses, like long-term care or medical costs.
The greatest fear of many retired seniors, and those approaching retirement age, is running out of money during their retirement years. Ironically, most seniors don’t view their life insurance as an asset that may contain significant fair market value (FMV) and can be liquidated to help fund immediate needs. As a result, seniors are lapsing at least $112 billion in life insurance policies every year without getting an appraisal of FMV. This lack of knowledge about life insurance FMV is a costly oversight when you consider just how much of that value seniors could reclaim, an estimated $22 billion annually, for policies that qualify.
Why are so many policies lapsed?
- People are living longer than expected and could potentially outlive their life insurance coverage.
- The Great Recession damaged retirement accounts of countless seniors’, leaving them with less money than they need to live comfortably.
- The extended period of low interest rates has negatively impacted the cash buildup of life insurance policies and causing them to fail meeting their intended goal.
- Many seniors have experienced significant unexpected premium increases that put a strain on cash flow.
- Term insurance could have FMV, but most policy owners and advisors are unaware of this fact and neglect to get a policy appraisal prior to the decision to lapse.
Together, these factors have created a true crisis for thousands of American families and contribute at least partially to $112 billion in policies lapsed annually by seniors.
Long-term care expenses can be a burden on the whole family.
Financial advisors are in a unique position to help their senior clients protect their quality of life, whether they are living at home, or in a long-term care facility. We know from the countless advisors we’ve worked with throughout the years that paying for long-term care and medical expenses can put intense amounts of stress on the entire family. Since family members often contribute to payments for a senior’s care, those seniors who are receiving the care worry about the financial effect on their adult children - and especially how it will affect their grandchildren’s futures. This often leads to loss of dignity and depression for seniors.
On the other hand, those who are helping to pay for a parent’s long-term care can feel financially strapped, and unable to save for their own retirement and provide what they would like to for their own family. On the other hand, those who are helping to pay for a parent’s long-term care can feel financially strapped, and unable to save for their own retirement and provide what they would like to for their own family.
A solution may be hidden in plain sight.
When seniors sell their life insurance policies through their financial advisor and a life settlement broker they receive a lump sum of cash that is greater than the surrender value of the policy. We’ve brokered life settlements in which the policy owner received as much as 800% more than the policy’s surrender value.
The lump sum is a cash payment the senior is able to use however he or she wishes. Often, it’s put toward long-term care. One popular option is to place the money into an account that makes regular payments to the care facility. The relief that life settlements can give to a family is extreme. With those additional funds, families can put some of their focus back on the most important things - spending time together, making their loved one comfortable, and ensuring that their own children are well provided for. Also, mom and dad can live out their lives in dignity knowing that they were able to lift a burden from their children by getting liquidity from a life settlement.
You can learn more about how the life settlement process works from the Life Insurance Settlement Association guidelines for advisors and their client to follow when attempting a life settlement.