It’s a fact. Senior women continue to outlive their spouses by approximately five years. With the average life expectancy in the U. S. at age 77 for men and 82 for women, more and more women are living out their retirement years as widows. According to the U. S. Census Bureau, on average women become widows before age 58, and the percent of women who live in a household without a spouse increases from 40 percent to 84 percent from age 55 to 85.
Although most women today are taking a more proactive role in decisions relating to insurance and financial security in their retirement years, financial literacy among senior widows is still lagging.
So when it comes to decisions regarding financial challenges – such as the best course of action for a second-to-die life insurance policy with escalating premium payments – many widows are uncertain of their options.
If you, or someone you know, fit the description above, you owe it to yourself to become familiar with life settlements – especially as it relates to survivorship policies.
While most life insurance policies pay a death benefit when a particular person dies, such as to a surviving spouse, second-to-die (survivorship) policies pay a death benefit following the death of the second spouse. These types of policies were commonly purchased to provide for a couple’s beneficiaries upon the death of both parents, or to assist heirs with the payment of estate taxes.
But what happens when a surviving elderly spouse is faced with premium payments for a survivorship policy she can no longer afford?
We’ve seen some situations where a widow in her 70s or 80s had a survivorship policy which the husband had purchased in the late 1980s. But as a result of the sustained low-interest rate environment over the last ten years, the policy values were not performing as projected. Consequently, the life insurance carrier issued premium increases and the policy was in danger of lapsing because the payments were no longer affordable.
Once a policy is in danger of lapsing due to escalating premium payments, it’s important for the insured to ask some tough questions regarding whether the coverage is even necessary. As life changes, so do an individual’s needs. A life insurance policy purchased in the past may not align with a policy owner’s current needs. Begin by asking the following:
- Has there been a change in the client’s estate that would impact the estate taxes?
- Has the insured outlived the intended beneficiaries?
- Have the premiums become too expensive?
- Would a different type of policy or financial product be more appropriate? (e.g. long-term care, health insurance, annuity, etc.)
- Does the insured need money to pay for retirement expenses or to travel and enjoy life?
Once the decision is made that the policy is no longer needed, the next step is to explore the insured’s eligibility for a life settlement using the following guidelines:
- All types of policies qualify; e.g. term, whole life, universal life, joint–survivorship, group, corporate-owned policies (COLI), key man policies, and policies held in irrevocable life insurance trusts (ILITs)
- Insured must be over the age of 65 (average age for settlements in 78)
- Life expectancy of 12 years or less
- Change in health (decline) since the policy was issued
- Life insurance carrier must be rated B+ or better
- Policy face value is $250,000 or higher (policies with less value may be accepted)
- Annual premiums should be less than 5% of the policy face value
Due in large part to information available over the Internet, more senior women today are taking a proactive role in researching solutions to their financial challenges. Whether placed in the decision making role out of necessity, or through their initiative and empowerment, senior women who are faced with uncertainty involving unwanted life insurance policies should explore their eligibility for a life settlement. It is never advisable to accept a low cash surrender value or allow a policy to lapse without first determining if a life settlement is an option.
To determine where you are a candidate for a life settlement, feel free to give us a call at 800-216-2513, or visit our website to complete our online qualification form. We also encourage you to read the informative articles found on our website’s blog page.
For additional resources on the topic of life settlements, you may be interested in downloading the informative brochure titled, “10 Reasons Seniors Choose Life Settlements,” published by one of our strategic partners, Asset Life Settlements.