Posted Sep 25, 2017
What are the alternatives to lapsing a life insurance policy?
Learn about your alternatives before you decide to lapse your life insurance policy.
More than 100 years ago, the U.S. Supreme Court ruled that life insurance is personal property. The importance of that decision means that you have the ability to sell your life insurance policy just like you could sell the car you drive or maybe the watch you wear. Unfortunately, you and many others may not be aware of the simple truth.
A recent survey completed in 2016 found approximately 86% of the senior respondents were not aware a life settlement was an option for them to consider. Previous industry surveys covered by LifeHealthPro reflect 90% of seniors who lapse policies without knowing about a life settlement indicated they would have considered this option had they known about it.
So, in the absence of knowing about any other alternatives you may have, most policy owners simply go the route allowing the policy to lapse. Or they surrender the policy back to the insurance company for whatever small amount of cash surrender value is available.
In working with clients over the years, we have found many of them can’t afford to continue paying their premiums any longer or have concluded they just don’t need the death benefit anymore because their kids are grown and financially stable.
If these characteristics sound like they might apply to your situation, let me ask you to apply this common-sense test: if you could surrender your policy for its cash surrender value or you could sell that same policy to an institutional investor for three to five times the cash value which would you prefer? We’re quite certain you would prefer the settlement option.
We also want you to know there may be other options you should consider as part of your evaluation. For example:
- using a policy loan to maintain the policy;
- reduce the death benefit and premiums; and
- if it is a term policy, determine if it can be converted to permanent insurance.
As with most financial decisions, the option that fits best for you will depend on your unique situation.
To learn more about life settlements, how they work and if you are eligible, call 877-927-7243.