In September of each year, the nonprofit organization “Life Happens” launches an awareness campaign to remind Americans of the need to include life insurance in their financial plans. This annual educational initiative is supported by more than 100 of the nation’s leading insurance companies and industry groups.
According to the National Association of Insurance and Financial Advisors which participate in the awareness campaign, “too many people are taking an unnecessary risk by not protecting their loved ones with life insurance.” The organization points out that one in three households would have immediate trouble paying living expenses if the primary wage earner died.
There is no question that life insurance is a critical component of a family’s financial plan, especially for young families with children. As Life Happens points out in their awareness campaign, “the first step in establishing your financial security is to confront the biggest threats to it by asking yourself some tough questions: What would happen if you or your spouse or partner became sick, injured or died? All of these situations can be devastating to your family’s financial health. That’s where insurance comes in.”
But as time goes on, children leave the nest, priorities change, and life insurance is no longer needed. In short, life happens!
According to the Life Insurance Settlement Association (LISA), “As Americans enter their senior years, they often experience unexpected changes that alter their priorities. Policies that once made sense no longer do under new circumstances. For instance, decisions that seemed appropriate when policyholders had children in the house may no longer seem appropriate. These life changes may drive some seniors to decide that a given life insurance policy is no longer relevant and that other steps should be taken to achieve full financial empowerment.”
That’s why at Trust Life Settlements, we believe that Life Insurance Awareness Month presents the perfect opportunity to showcase life settlements as a final step in the life cycle continuum of a life insurance policy that is no longer needed. It’s clear to us why more should be done to inform seniors about the advantages of selling their policies in the secondary market for life insurance.
Over the past several years we’ve talked with many seniors who are searching for answers when it comes to the best option for unwanted policies.
- Are there more attractive alternatives than to surrender a policy?
- Is it possible to recover money necessary to make new investments and more effectively manage the financial estate?
- If new policies that offer lower premiums and better guarantees are now available, is there a way to transition to a new policy without incurring financial punishment?
- If life circumstances change, is there a way to sell the policy and still realize a fair settlement?
- What are the available options?
Unfortunately, the life insurance companies offer no real answers to these questions. Customers do have the option to “surrender” their policies, which means the policyholder will be offered a small fraction of the policy’s face value. Insurance companies are requiring life settlement companies to inform seniors about the accelerated death benefit option. However, they are not informing seniors of the option for a life settlement.
LISA reports that policyholders often let policies lapse, in which case they receive nothing for their years of premium payments. Their contracts are simply null and void. There are even cases where a spouse, who previously was responsible for the bills, has died and the life insurance policy goes unrecognized. There are others where family members take responsibility for an individual who suffers from Alzheimer’s or some other serious debilitation late in life but are unaware of – and, thus, neglect to pay – a life insurance bill.
For a growing number of seniors who thought they had no viable choices for an unwanted policy, life settlements represent an important option. Rather than continuing to pay premiums on a policy that no longer serves its original purpose, life settlements offer lump sum cash payments that are significantly greater than surrendering a policy.
As September (Life Insurance Awareness Month) draws to a close, it’s important for senior consumers to be mindful that life settlements offer a sensible and often profitable exit strategy from life insurance policies that have reached the end of their product lifecycle.