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Sunday March 16, 2008 12:00AM | Click here to visit original article.
Seniors can now find 3rd party buyers for their unwanted insurance policies. And yes, they now have a plethora of choices as various Life Settlement Providers bid against each other to get their hands on these valuable assets deemed useless by their original owners.
Elderly Americans with policies they do not need or cannot afford to keep have had little option but to let the policies lapse or sell them back to their insurers. Plenty seem glad to have an alternative buyer. No wonder, when on average they can get three times as much from life settlement as they can from their original insurers.
Life Settlements can make sense for sellers who no longer need coverage and no longer want to pay premiums. Selling an unwanted policy increasingly is becoming a financial management tool for older people who face a cash crunch, who don't want to rely on children for financial support or who are trying to find money for costly long-term care insurance. Some holders of term policies sell them because they've found equal or better insurance coverage at a lower rate.
For people with universal-life coverage, which combines a death benefit with a savings component, the value of a policy in a life-settlement transaction is generally at least three times the underlying cash value of the policy...Even term policies, which have no underlying cash value and typically disappear at the end of a set amount of time, are worth something—often between 10% and 30% of the policy's face value.
Some recent sales of life insurance policies resulted in the following payments to seniors:
- $248,947 was paid for a $1 million term policy held by a 66-year old.
- More than $232,000 was paid for a $2 million universal policy that had a cash value of $53,300.
- $160,000 was paid for a combined policy on a man in his 60s. The owner said, "I thought they had no value—I would have just turned the policies in for nothing."
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80 Year Old Female
$400,000 Universal Life
$0 Surrender Value
Paid: $68,000
68 Year Old Male
$200,000 Convertible Term Life
$0 Surrender Value
Paid: $40,500
68 Year Old Male
$600,000 Universal Life
$29,845 Surrender Value
Paid: $94,000
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