Over half of all seniors are unfamiliar with life settlement transactions. Of those that have heard of them, many do have an accurate understanding of the process or the transaction. Misunderstandings and misconceptions unfortunately get in the way of innumerable seniors cashing in their life insurance policies for large lump sums.
The earlier predecessor to life settlements were viatical settlements. This practice involved third parties buying life insurance policies covering terminally ill insureds. As the industry and buyers evolved, viaticals fell out of favor for a number of reasons. The focus shifted to healthy senior citizens. Now, life settlements are solely focused on healthy seniors and a terminal illness is in no way a prerequisite to selling an existing life insurance policy.
Medical exams or in person health evaluations are not part of modern life settlements. While life settlements do involve an analysis of an insured’s health, this is accomplished by third party actuaries only reviewing medical records. The documentation is ordered by a life settlement broker and the policy seller has no burden in obtaining the records other than signing a release allowing for their request.
While cash value can accumulate in many policies, it is not necessary for a life settlement. In fact, a high cash value balance in a policy may make it undesirable. Buyers sometimes have trouble making offers sufficiently attractive to sellers when the cash surrender value of a policy is excessive. In other words, high cash values means the policies become too expensive in some cases. The most attractive policies to buyers are ones with little to no cash value.
While life settlements are still foreign to many Americans, the industry is growing in popularity and notoriety. Eliminating the confusion that exists in the marketplace will help seniors unlock the potential windfall many don’t realize they have in their own life insurance policies. The first step is to find a good life settlement broker to assist with the process and then evaluate the offers that are presented.