Let me give you a brief overview of Life Settlement options and how they work. For starters, consider this statistic: approximately 88 per cent of life insurance policies never result in a death claim: they are allowed to lapse or are surrendered. A surrender or lapse is, essentially, the sale of the policy back to the insurance company for cash value. However, if the insured’s health has declined, the insured is no longer insurable in the same rate class; in that case, the policy may be worth considerably more than the surrender value.
Consider, also, this statistic: In 2009, the senior market was estimated at $5 trillion of in-force life insurance policies. Remember, with the “graying of America,” the senior market is burgeoning
For many years, the insurance companies were essentially the only market for this commodity in which an individual has probably been investing for years. The advent of a secondary market has now
created a free market for policy owners to value their insurance just as they do other financial assets.
This secondary market traces its roots back to the AIDS crisis of the mid ‘80’s. At the time, AIDS victims with little or no estate needed to cash out of life insurance policies to pay for expensive medical treatment.
A recent article entitled, “The Benefits of a Secondary Market for Life Insurance Policies,” published by the American Bar Association (Real Property, Probate & Trust Journal), concludes that the secondary market is both pro-competitive and pro-consumer.