What the Heck are Life Settlements Anyway and Why Should I Know About Them?

Most of us are aware of reverse mortgages and how they can help support us as we age. If you’re 62 or older – and want money to pay off your mortgage, supplement your income, or pay for healthcare expenses – you may consider a reverse mortgage. It allows you to convert part of the equity in your home into cash without having to sell your home or pay additional monthly bills. In general, the older you are, the more equity you have in your home; and the less you owe on it, the more money you can get.

Sounds good right? . . . and for many it’s an excellent choice. But, it’s not the only choice.
There’s a big secret that the insurance industry doesn’t want you to know. Did you know that there are more than 150 million life insurance policies with $12.3 trillion of in-force death benefits owned in the United States? The BIG secret is that nine out of ten life insurance policies are in danger of being abandoned before paying a death benefit. Why? Because, owners abandon their policies. Perhaps they can’t pay the premiums. Maybe they just forget about them. In fact, close to $700 billion in death benefits were abandoned by policy owners in 2017. Hard to believe. Who do you think gets to keep all that money, including not having to pay out a death benefit? You guessed it … the insurance companies.
It’s clear that insurance companies do not want you to know this. They don’t want you to know that life insurance policies are legally recognized as assets of the owner. They also don’t want you to know that there’s a secondary market where policy owners can sell off a policy that may otherwise be abandoned through what’s called a LIFE SETTLEMENT.

How do Life Settlements work? 

If you’re not terminally ill, you can sell your life insurance to a life insurance settlement company. Life insurance settlements typically target people over 60 years old, not the young and healthy. Should seniors abandon this asset that they’ve paid into for years? The answer is generally no. Just like choosing a reverse mortgage, choosing a life settlement is an option.  

Before the owner of a life insurance policy would abandon their asset, they should first look into the life settlement market to find out what the actual cash resale value of the policy is.
Here are some critical questions to ask yourself:
  • Are your payments more expensive than you can comfortably afford?
  • Do you have more life insurance than you need?
  • Is the policy in danger of lapsing? (Term policies or non-payment).
  • Do you need the cash?
  • Are your beneficiaries gone?
If so, a life settlement might be a fabulous choice.
Why?  Here’s the Big Secret!!!
  • 90% of life insurance policies are in danger.
  • Life insurance is legally recognized as an asset and personal property.
  • Life settlements are a growing financial option for seniors.
  • Life settlements can pay out 7 to 10x more than cash value on average.
  • The payout is largely tax-free.
Now, the secret’s out. Insurance providers should not be looking at whether life settlements are good or bad for the insurance industry, but because life settlements can be good for the insurance industry’s clients.
I’ve given you a 30,000 foot view of life settlements in this newsletter. If you have an interest in learning more, I am happy to refer you to experts in the field. Don’t forget that you should never approach any important financial decision without researching your subject and understanding its pros and cons. Life settlements are not for everyone. But for many clients, they offer life-changing financial outcomes.

Yours in health,


Quote of the month:

“Choices are the hinges of destiny.” ~ Edwin Markham