Ever since Benjamin Franklin helped start the first life insurance company in the U.S. in 1759, life insurance has been a key part of our lives and financial planning. But, according to research from the Insurance Studies Institute, 500,000 seniors each year lapse their life insurance policies. That’s a big number! Many people think they only have three options: pay the premium, lapse the policy or surrender the policy. There are more options available, and a life insurance settlement is one of them. Simply put, a life insurance settlement is the sale of a life insurance policy to a third party (usually an investor group) who gives the client cash for the policy, and in turn, becomes the owner of the policy, pays the premiums, and receives the death benefit when the policy matures. Misinformation and myths abound surrounding life insurance settlements.
Myth #1 – Only permanent policies (Universal and Whole Life) can be sold. Untrue! Yes, even term policies can be sold. In fact, term policies represent the second most sold type of life policy, behind universal life. How? The key is that the policy must be convertible and the policy cannot be past the conversion deadline. Many term policies, if convertible, have conversion deadlines based upon the age of the client, or on the length of time the client has been insured. Some have conversion deadlines corresponding to the end of the policy term. An important suggestion is, if a client wishes to sell a term policy, plan to start six months ahead of the deadline to allow plenty of time to complete the settlement.
Stay tuned for Myth #2 in the next post….
Lisa Rehburg, Rehburg Life Insurance Settlements
(714) 349-7981, firstname.lastname@example.org
Last modified: July 22, 2019