It’s not a secret that in these days and age, people are living longer than ever before, which is supposed to be great news, isn’t it?
Well, not for everybody as not all people can really enjoy the full benefits of longevity – they simply can’t afford it.
More and more older persons are imposed to the risk of running out of money and facing mounting debts, hence looking for bailout options has become a new reality. Selling life insurance policies is one of them and here are 4 reasons why having a life settlement is a huge trend right now.
What Is A Life Settlement?
Simply put, a life settlement is the sale of a life insurance policy to an investor for a lump sum of cash, which is greater than the policy’s cash surrender value but less than the death benefit.
As a rule, life settlements bring owners 3 to 4 times the amount of their policy’s cash surrender value, the precise sum can be figured out with a life settlement calculator. By answering just a few simple questions such as “What type of policy do you have?” or “What is your approximate annual premium payments?”, people can get a customized life settlement estimate.
Reason #1: Urgent Need For Funds
People have always had various financial constraints, but the recent COVID-19 outbreak has badly affected millions of people, leaving them without jobs and the opportunity to pay their bills. Since a big number of these workers are seniors, it comes as no surprise that they see their way out of numerous problems in life settlements, which became a sustainable source of funds that they need urgently. In addition to that, many older seniors (mainly those of 65+) do not need extra coverage anymore, using life settlements as the alternative investment.
Reason #2: Higher Estate Tax Exemption
Introduced in 2017, the new estate tax exemption was increased up to $5.5 million. What’s more, just a year, it was on a rocket ride to a staggering $11.18 million for singles and $22.4 million for married couples. One does not have to be a math genius to figure out that an average policy owner who acquired life insurance in order to pay estate taxes just does not need it anymore since his/her estate tax issue is no longer actual.
Reason #3: Increased COI Charges
While interest rates are lower than ever, COI carriers can’t make money from investments. To stay in the game, they have started to charge customers more for their COI, hence many policy owners have opted for selling their policies.
Reason #4: Comfortable Regulatory Environment
The fact that 43 states and Puerto Rico have laws that guarantee policyholders protection in the sale of a life insurance policy is another reason that more and more seniors feel confident to finance their medical bills, long-term care expenses, or “aging in place” through life settlements.
The statistic shows that the great bulk of policyholders either no longer need their policies or simply can’t afford to keep them, with around 88% of all universal life policies being lapsed or surrendered without payment of a death benefit. Now you know why a life settlement is such a popular option.