Well, the short answer is because they no longer need or want it. But, there is more to it than that.
Policies can be sold through a life insurance settlement. What is a life insurance settlement, you ask? Simply put, it is the sale of a life insurance policy to a third party (usually an investor group) for more cash than any cash value or surrender value in the policy. The investor group then becomes the new owner, continues to pay the premiums, and receives the benefit when the insured passes away. The benefit to the client is that they receive a lump sum payment that is 3 – 5 times greater, on average, than the surrender value of the policy. Typically, the best candidates for life insurance settlements are clients 65 years or older with a policy face amount of at least $100,000, but this is just a guideline.
The numbers are staggering. 500,000 seniors a year lapse their life insurance policies, translating to over $100 billion in face value…that’s billion, with a “b”. That is a lot of value that seniors are giving up, for nothing, each year. Additionally, 90% of seniors who have let a policy lapse would have considered selling it had they known life insurance settlements existed.
Each client is unique, and the reasons they have for selling their life insurance policies vary, but in each case, the client no longer needs or wants their policy. The most common situations include:
- A term policy that is nearing the end of the policy term;
- A policy purchased to cover estate taxes is no longer needed now that the estate tax exemption has doubled;
- A client may have retired, and with mortgages paid off and kids through school, no longer needs the coverage;
- The policy may be becoming too expensive to maintain;
- A business owner sold a business and no longer needs the “key man” coverage;
- One spouse may have passed away, leaving the other with no need for life insurance;
- A rental property or second home has been sold, leaving no need for the coverage;
- And more….
The reality is that a life insurance settlement may be a good option if your life circumstances have changed and you find yourself no longer needing your life insurance policy. Please consult your financial and insurance professionals when considering a life insurance settlement. After all alternatives have been considered, and it is determined that the policy is going to be lapsed or surrendered, a life insurance settlement can offer a significantly greater value. The evaluation of a life insurance policy is free of charge and you are under no obligation to take any offers received. It can’t hurt to try – but it can hurt not to! -Lisa Rehburg
Rehburg Life Insurance Settlements is a life insurance settlements broker, and helps people benefit from their unwanted or unneeded life insurance policies. By having access to many investor groups, Rehburg Life Insurance Settlements can place more policies and realize a better return for clients. Lisa has been licensed for almost 30 years and has specialized in supporting financial and insurance professionals in helping their clients. She can be reached at (714) 349-7981, firstname.lastname@example.org or www.rehburglifesettlements.com.