Rating:
0 user(s) have rated this article
Abstract:
A Senior Life Settlement, often referred to as a life insurance settlement or a viatical life settement, is the sale of an existing life insurance policy of a senior citizen for a lump sum of cash.
What is a "Senior Life Settlement"?
A Senior Life Settlement, often referred to as a life insurance settlement or a viatical life settement, is the sale of an existing life insurance policy of a senior citizen for a lump sum of cash. It is less than the policy’s face amount but more than the cash surrender value. A life insurance policy is property, like a house, car, or stocks and bonds; it may be sold in accordance with applicable laws.
According to Conning and Company, 2003:
The National Association of Insurance Commissioners (NAIC) estimates that in 1996 nearly $1.5 trillion face amount of life insurance policies, expired, lapsed, or was cancelled by policyholders; each policy was a potential source of wealth had the owner sold it on the secondary market [through a senior life settlement].
Industry experts forecast the Senior Life Settlement market to be between $20 and $50 billion annually over the next decade.
How can you benefit?
Through a Senior Life Settlement transaction, a policy owner can realize value today from an asset that is generally thought to only have benefit when the insured passes away. It permits the policy owner to unlock the financial value of their life insurance policy while still living. The benefits include:
- Receiving a lump sum of cash to invest or spend as desired
- Eliminating premium payments
- Receiving a tax deduction if some or all of the money is donated to charity
- Having the ability to purchase a more appropriate policy
Why would a senior citizen want to sell their life insurance policy?
There are countless reasons why a senior citizen may want to sell their life insurance policy, but the following is a list of the most common:
- The policy may no longer be needed or wanted
- There is a forced liquidation due to bankruptcy or other financial hardship
- There is a change in estate planning needs
- To pay for the rising cost of long-term heath care
- The premiums become unaffordable
- There is a change of beneficiary due to death or divorce
- To receive more money than the case surrender value of the policy
- The desire to live their retirement years more comfortably
How much money can the policy holder expect to receive for his/her life insurance policy?
Each transaction of a life insurance policy is unique and the life insurance policy needs to be appraised. On average, a Senior Life Settlement yields nearly 4 times the cash surrender value. The typical criterion for a policy to qualify is as follows:
- Insures a person that is 65 years or older (people with a terminal illnesses may also qualify)
- Has a face value of at least $50,000
- Insurance coverage from this policy is no longer needed or wanted
- Has been in force for at least 2 years
According to Conning and Company, 1999:
Of the more than $490 billion in life insurance policies in force and insurance the lives of Americans over the age of 65, nearly $108 billion of this insurance may qualify for a Life Settlement today. While exact figures as to the total face value of Senior Life Settlements purchased in the last decade are hard to com by, industry estimates indicate that the total volume of policies purchased over the coming decade will grow 5 to 8 fold.
In fact, it is estimated that less than 2% of the Senior Life Settlement market has been serviced, indicating that the industry is still in its early stages. The potential for growth is enormous.
Related Articles:
How to Invest Your Money while in DebtWhat's the Fastest Way to Get Out of Debt and Lower My Bills?Bank Like a BankerSenior Life Settlement Directory
You may also be interested in:
How would you rate this article?
User Feedback
Post your comment