Have You Out-Lived Your Life Insurance?
Have You Out-Lived Your Life Insurance? Are you holding a valuable asset you may not even realize you have? Here’s a smart way to turn your life insurance into CASH that you can spend for the needs you have today and tomorrow. See if it’s right for you……
Everything changes.
Your life has changed – has your life insurance?
You may be one of many who bought universal or whole life insurance years ago to provide income protection for your family and find that you no longer need this type of insurance.
Maybe the money you have invested in that policy is needed for new and different reasons. Like being on a fixed income with decidedly unfixed expenses. Perhaps you need in-home care or are moving from your home to an assisted living facility.
You may simply be planning for the day when long-term care expenses become a real factor in your life. So that $ 100,000, $500,000 or even $1,000,000 life insurance policy from 20 or 25 years ago—with its rapidly escalating premiums and decreasing real cash value—doesn’t look so good anymore. What do you do? This blog will help you review your alternatives for these policies. Only by evaluating your options can you make the best decision for your family.
A few words about your current life insurance.
Any life insurance policy is a contract. Your contract provides the options available to you if you decide to discontinue paying premiums as they come due. If yours is a traditional term-type policy, coverage simply expires at the end of the period for which the premium has been paid.
Other types of policies may have positive cash values. These cash values can often be used to either fund loans to continue your coverage, or can be withdrawn if the policy is surrendered for termination. Whatever type of policy you have, when you allow it to terminate, surrender it for its cash value or sell it, the right to a future death benefit is lost.
Making the best of a tricky situation.
So what are the alternatives? We—want you to know your options.
1. You can continue to pay the premiums and keep the policy in force for the full payout upon your death. Food for thought: most of these policies have premiums that increase as you get older—up to thousands of dollars each month.
2. Ask your insurance company to reduce the face value of your policy in exchange for lower premiums.
3. Continue to pay the premiums, but ask the beneficiary(s) to help you pay those premiums.
4. If your policy has cash value and the terms permit, you may borrow against it to pay the premiums. Food for thought: depending on the accumulated value and how long you live, you may run out of cash value to borrow against. Then you are back to square (and option) one.
5. You can stop making premium payments and allow the policy to lapse. If there is any remaining cash value, the premiums may continue to be paid for you until that cash value is used up. See number four.
6. You can sell the policy back to the insurance company for what is called the cash surrender value. This is the accumulated cash value that you have paid in, plus any investment returns on the policy, minus any loans against the policy, minus fees your insurer charges you for surrender and minus termination and the accumulated amount of mortality charges. These are charges that your insurance company has paid itself to assume the risk of having to pay the death benefit. Food for thought: the cash surrender value will be small percentage of what the policy would pay upon your death.
7. Sell the policy to a third party (that would be us) in what is called a senior settlement or life settlement –usually for much more than the cash surrender value.
Which of these options is the most attractive in your current situation? Only you and your financial advisor can decide that. If simply letting your policy lapse, or surrendering all of its face value for dimes on the dollar sound like unattractive options, keep in mind that one or the other of these two things happen to a startling 80 percent of all universal life insurance policies.
A word about Accumulated Cash Value and Surrender Charges
Accumulated cash value is the term used in Universal Life and other types of policies to describe the total of all premiums paid and interest credited to the account before the deduction for any expenses including the cost of insurance, loans or surrender charges. The surrender charges reduce the amount of your cash value should you choose the option of surrendering your policy to the insurance company. Although surrender changes decrease the longer the policy is in force, surrender charges can be 10% or 15% of the policy death benefit and usually don’t phase-out completely for 15 years.
In the late 1990’s specialized financial service companies started to purchase unwanted and unneeded life insurance policies from policyowners in transactions known as life settlements. A life settlement is a transaction in which policyowners sell the ownership of a policy, including the right to name a beneficiary, to an unrelated party for cash. Because the life settlement buyer can take into account your current medical status, the price paid for the policy is often greater than the accumulated cash value offered by your issuing life insurance company. The new owner continues to pay the premiums until the death of the insured and then collects the net death benefit of the policy.
In this blog, in line with industry practice, we draw a distinction between a “life settlement” and a “viatical settlement”. We consider a “viatical settlement” to be a transaction involving the purchase of a policy which covers the life of someone who suffers from a terminal, catastrophic or life-threatening illness and where the insured’s primary physician does not expect them life for more than 2 years.
On the other hand, a life settlement transaction does not involve a transaction with a terminally ill person. However, you may sometimes hear the terms used interchangeably. For example, some regulate transactions with the terminally ill (viatical settlements) but refers to them “life settlements”.
Our company does not solicit terminally ill owners of such policies and does not engage in the viatical settlement business. These educational materials are not intended to address viatical settlement transactions.
A little unpleasant truth.
None of these things are much fun to think about, and the following realities make it even less so. But these are what you are facing today and tomorrow, and forewarned is forearmed.
About your premiums:
Some kinds of insurance have level premiums. In other words, you pay the same premium amount for as long as the policy remains in force or until it becomes a paid up policy, usually when the insured reaches age 100. However, most policies, like universal and flexible life insurance policies have premiums that depend on the performance of some kind of interest rate component that is part of the policy package.
These policies include a mortality charge portion of the premium that increases more rapidly as you get older. If you have one of these policies, the premiums that you pay will likely increase by as much as 8 percent to 10 percent per year.
This is roughly double what the investment yield on your policy is likely to be. What does this mean on the bottom line? The $500,000 policy that costs you $1,465 per month at age 70 could cost you a staggering $6,685 per month at age 85. This real life example is why 9 of every 10 universal life policies lapse or are surrendered.
Finally, even if you have a level premium type of policy, will you or your beneficiary still be able or want to pay those premiums year after year, especially if you or they need to use the money so that you are properly cared for as you grow older?
Let’s talk health:
An important definition is that of Life Expectancy (LE). This is the average amount of time a given person can be expected to live, taking into account both their own personal information and general statistical information. There are various tables and other sources of information about life expectancies.
The following table shows life expectancy data in effect in 2006. Person at
Age Life Expectancy/Male Life Expectancy/Female
60 19.81 23.11
65 16.15 19.09
70 12.81 15.36
75 9.86 11.97
80 7.31 8.94
85 5.20 6.40
For example, a male age 75 has an actuarially determined average chance of living to be 84.86 years (age 75 today, plus and expectancy of an additional 9.86 years). Sixty (60) percent of Americans over age 75 need someone else to help them deal with the effects of aging on their physical and/or mental situation. Half of those will stay in an assisted living or nursing home for about three years.
In 2007, a private room in a U.S. long-term care facility averages about $94,000 per year.
Is it time to look at alternatives to your insurance?
Hopefully, you have done a better job at saving than half of the people mentioned above. You may even have long-term care insurance. But the reality remains that, for many people, the life insurance purchased back when their responsibilities were different may no longer be the best use of their investment.
You and your financial advisor may conclude that a senior settlement from Life Settlement Financial is a smart way to recoup more of our investment. How much more?
Let’s look at an example: Let’s assume that you have a $1,000,000 universal life policy with a cash surrender value of $125,000. Our hypothetical senior settlement on your policy would pay you $225,000 or $100,000 more than you would get if your surrendered your policy for its cash surrender value. This $225,000 can pay a lot of current expenses or for some years of long-term care that would otherwise have to be paid from some other sources (assuming there are any). And, because a life settlement does not involve the surrender of the policy, you avoid paying surrender charges, if any.
Now suppose you don’t have immediate needs for the money and decide to invest it. Over the last 28 years, had you faithfully invested your money and let the returns grow without moving between investments, a balanced index of 40% bonds and 60% stocks would have yielded an average of 9%. During the same period, the Vanguard 500 Index Fund (S&P500 Index) yielded over 12%. By contrast, your insurance company only averages a 5.5% investment yield after costs. Even with this conservative 5.5% return, in the same 10.2 years it would take the cash surrender value of your life insurance policy to double to $250,000, your alternate investment could actually reach and begin to exceed the $1,000,000 face value of the policy. (The average life expectancy, by the way, for a 70 year old male is nearly 13 years and longer for a female. The numbers are similarly encouraging for virtually any size whole or universal life policy.
Getting a senior settlement is a simple process.
A senior settlement is a valuable alternative to surrendering your life insurance policy to your insurance provider, because you will often receive more than the cash surrender value payment obtained from the insurance company.
First, discuss all your options with your financial, estate planning and/or legal advisor. Then, if a senior settlement looks attractive to your needs, you or your advisor can contact Life Settlement Financial to begin the process. After we have reviewed your life insurance policy and you have given permission to do so, we will obtain and carefully review your medical records and status. When that is done, and we have decided that we want to make an offer to buy it, you will be presented with a proposal to buy your insurance policy for a specific amount of money.
The amount offered will be paid in a lump sum as soon as the necessary details for transfer of the policy ownership are completed. All financial and medical information about you will be strictly protected under privacy laws, and by very sophisticated internal security measures and procedures.
Furthermore, senior or life settlement transactions are regulated for your protection. The time required to do a senior settlement is directly tied to how long it takes to get the information necessary to evaluate your medical status and your insurance company’s ability to respond to requests for information and action regarding your policy. If everything goes right, a senior settlement may close in two or three months. Otherwise, it could take up to six months or more to get the job done to everyone’s satisfaction.
An important reminder This blog was written for someone like you who owns an insurance policy on his or her life. However, a senior or life settlement transaction can be made by anyone who owns a life insurance policy of almost any kind, and has the right to name the beneficiary under the policy. So, if you own a life insurance policy on someone else’s life such as your spouse, business partner or anyone else, that life insurance policy can be the subject of a senior settlement, if and when you might decide, or need to turn it into money.
The choice is yours- death benefit or senior settlement Now you know about more options – freedom – for making the most of the money you’ve invested in life insurance, and we hope that we have answered some of your questions about those options. You should definitely discuss this with your estate planner or financial advisor who can give you more information. You may also wish to visit our blog site If you think that you may have outlived your life insurance, and that you have better ways to use your investment money from that unwanted or unneeded policy, a senior settlement from Life Settlement Financial can unlock an immediate asset you may not have realized you possessed. It’s your future, and in this case it’s fair to say it’s a matter of life or death benefit.
Have You Out-Lived Your Life Insurance? Are you holding a valuable asset you may not even realize you have? Here’s a smart way to turn your life insurance into CASH that you can spend for the needs you have today and tomorrow. See if it’s right for you……
Everything changes.
Your life has changed – has your life insurance?
You may be one of many who bought universal or whole life insurance years ago to provide income protection for your family and find that you no longer need this type of insurance.
Maybe the money you have invested in that policy is needed for new and different reasons. Like being on a fixed income with decidedly unfixed expenses. Perhaps you need in-home care or are moving from your home to an assisted living facility.
You may simply be planning for the day when long-term care expenses become a real factor in your life. So that $ 100,000, $500,000 or even $1,000,000 life insurance policy from 20 or 25 years ago—with its rapidly escalating premiums and decreasing real cash value—doesn’t look so good anymore. What do you do? This blog will help you review your alternatives for these policies. Only by evaluating your options can you make the best decision for your family.
A few words about your current life insurance.
Any life insurance policy is a contract. Your contract provides the options available to you if you decide to discontinue paying premiums as they come due. If yours is a traditional term-type policy, coverage simply expires at the end of the period for which the premium has been paid.
Other types of policies may have positive cash values. These cash values can often be used to either fund loans to continue your coverage, or can be withdrawn if the policy is surrendered for termination. Whatever type of policy you have, when you allow it to terminate, surrender it for its cash value or sell it, the right to a future death benefit is lost.
Making the best of a tricky situation.
So what are the alternatives? We—want you to know your options.
1. You can continue to pay the premiums and keep the policy in force for the full payout upon your death. Food for thought: most of these policies have premiums that increase as you get older—up to thousands of dollars each month.
2. Ask your insurance company to reduce the face value of your policy in exchange for lower premiums.
3. Continue to pay the premiums, but ask the beneficiary(s) to help you pay those premiums.
4. If your policy has cash value and the terms permit, you may borrow against it to pay the premiums. Food for thought: depending on the accumulated value and how long you live, you may run out of cash value to borrow against. Then you are back to square (and option) one.
5. You can stop making premium payments and allow the policy to lapse. If there is any remaining cash value, the premiums may continue to be paid for you until that cash value is used up. See number four.
6. You can sell the policy back to the insurance company for what is called the cash surrender value. This is the accumulated cash value that you have paid in, plus any investment returns on the policy, minus any loans against the policy, minus fees your insurer charges you for surrender and minus termination and the accumulated amount of mortality charges. These are charges that your insurance company has paid itself to assume the risk of having to pay the death benefit. Food for thought: the cash surrender value will be small percentage of what the policy would pay upon your death.
7. Sell the policy to a third party (that would be us) in what is called a senior settlement or life settlement –usually for much more than the cash surrender value.
Which of these options is the most attractive in your current situation? Only you and your financial advisor can decide that. If simply letting your policy lapse, or surrendering all of its face value for dimes on the dollar sound like unattractive options, keep in mind that one or the other of these two things happen to a startling 80 percent of all universal life insurance policies.
A word about Accumulated Cash Value and Surrender Charges
Accumulated cash value is the term used in Universal Life and other types of policies to describe the total of all premiums paid and interest credited to the account before the deduction for any expenses including the cost of insurance, loans or surrender charges. The surrender charges reduce the amount of your cash value should you choose the option of surrendering your policy to the insurance company. Although surrender changes decrease the longer the policy is in force, surrender charges can be 10% or 15% of the policy death benefit and usually don’t phase-out completely for 15 years.
What is a Life Settlement?
In the late 1990’s specialized financial service companies started to purchase unwanted and unneeded life insurance policies from policyowners in transactions known as life settlements. A life settlement is a transaction in which policyowners sell the ownership of a policy, including the right to name a beneficiary, to an unrelated party for cash. Because the life settlement buyer can take into account your current medical status, the price paid for the policy is often greater than the accumulated cash value offered by your issuing life insurance company. The new owner continues to pay the premiums until the death of the insured and then collects the net death benefit of the policy.
What is a Viatical Settlement?
In this blog, in line with industry practice, we draw a distinction between a “life settlement” and a “viatical settlement”. We consider a “viatical settlement” to be a transaction involving the purchase of a policy which covers the life of someone who suffers from a terminal, catastrophic or life-threatening illness and where the insured’s primary physician does not expect them life for more than 2 years.
On the other hand, a life settlement transaction does not involve a transaction with a terminally ill person. However, you may sometimes hear the terms used interchangeably. For example, some regulate transactions with the terminally ill (viatical settlements) but refers to them “life settlements”.
Our company does not solicit terminally ill owners of such policies and does not engage in the viatical settlement business. These educational materials are not intended to address viatical settlement transactions.
A little unpleasant truth.
None of these things are much fun to think about, and the following realities make it even less so. But these are what you are facing today and tomorrow, and forewarned is forearmed.
About your premiums:
Some kinds of insurance have level premiums. In other words, you pay the same premium amount for as long as the policy remains in force or until it becomes a paid up policy, usually when the insured reaches age 100. However, most policies, like universal and flexible life insurance policies have premiums that depend on the performance of some kind of interest rate component that is part of the policy package.
These policies include a mortality charge portion of the premium that increases more rapidly as you get older. If you have one of these policies, the premiums that you pay will likely increase by as much as 8 percent to 10 percent per year.
This is roughly double what the investment yield on your policy is likely to be. What does this mean on the bottom line? The $500,000 policy that costs you $1,465 per month at age 70 could cost you a staggering $6,685 per month at age 85. This real life example is why 9 of every 10 universal life policies lapse or are surrendered.
Finally, even if you have a level premium type of policy, will you or your beneficiary still be able or want to pay those premiums year after year, especially if you or they need to use the money so that you are properly cared for as you grow older?
Let’s talk health:
An important definition is that of Life Expectancy (LE). This is the average amount of time a given person can be expected to live, taking into account both their own personal information and general statistical information. There are various tables and other sources of information about life expectancies.
The following table shows life expectancy data in effect in 2006. Person at
Age Life Expectancy/Male Life Expectancy/Female
60 19.81 23.11
65 16.15 19.09
70 12.81 15.36
75 9.86 11.97
80 7.31 8.94
85 5.20 6.40
For example, a male age 75 has an actuarially determined average chance of living to be 84.86 years (age 75 today, plus and expectancy of an additional 9.86 years). Sixty (60) percent of Americans over age 75 need someone else to help them deal with the effects of aging on their physical and/or mental situation. Half of those will stay in an assisted living or nursing home for about three years.
In 2007, a private room in a U.S. long-term care facility averages about $94,000 per year.
Is it time to look at alternatives to your insurance?
Hopefully, you have done a better job at saving than half of the people mentioned above. You may even have long-term care insurance. But the reality remains that, for many people, the life insurance purchased back when their responsibilities were different may no longer be the best use of their investment.
You and your financial advisor may conclude that a senior settlement from Life Settlement Financial is a smart way to recoup more of our investment. How much more?
Let’s look at an example: Let’s assume that you have a $1,000,000 universal life policy with a cash surrender value of $125,000. Our hypothetical senior settlement on your policy would pay you $225,000 or $100,000 more than you would get if your surrendered your policy for its cash surrender value. This $225,000 can pay a lot of current expenses or for some years of long-term care that would otherwise have to be paid from some other sources (assuming there are any). And, because a life settlement does not involve the surrender of the policy, you avoid paying surrender charges, if any.
Now suppose you don’t have immediate needs for the money and decide to invest it. Over the last 28 years, had you faithfully invested your money and let the returns grow without moving between investments, a balanced index of 40% bonds and 60% stocks would have yielded an average of 9%. During the same period, the Vanguard 500 Index Fund (S&P500 Index) yielded over 12%. By contrast, your insurance company only averages a 5.5% investment yield after costs. Even with this conservative 5.5% return, in the same 10.2 years it would take the cash surrender value of your life insurance policy to double to $250,000, your alternate investment could actually reach and begin to exceed the $1,000,000 face value of the policy. (The average life expectancy, by the way, for a 70 year old male is nearly 13 years and longer for a female. The numbers are similarly encouraging for virtually any size whole or universal life policy.
Getting a senior settlement is a simple process.
A senior settlement is a valuable alternative to surrendering your life insurance policy to your insurance provider, because you will often receive more than the cash surrender value payment obtained from the insurance company.
First, discuss all your options with your financial, estate planning and/or legal advisor. Then, if a senior settlement looks attractive to your needs, you or your advisor can contact Life Settlement Financial to begin the process. After we have reviewed your life insurance policy and you have given permission to do so, we will obtain and carefully review your medical records and status. When that is done, and we have decided that we want to make an offer to buy it, you will be presented with a proposal to buy your insurance policy for a specific amount of money.
The amount offered will be paid in a lump sum as soon as the necessary details for transfer of the policy ownership are completed. All financial and medical information about you will be strictly protected under privacy laws, and by very sophisticated internal security measures and procedures.
Furthermore, senior or life settlement transactions are regulated for your protection. The time required to do a senior settlement is directly tied to how long it takes to get the information necessary to evaluate your medical status and your insurance company’s ability to respond to requests for information and action regarding your policy. If everything goes right, a senior settlement may close in two or three months. Otherwise, it could take up to six months or more to get the job done to everyone’s satisfaction.
An important reminder This blog was written for someone like you who owns an insurance policy on his or her life. However, a senior or life settlement transaction can be made by anyone who owns a life insurance policy of almost any kind, and has the right to name the beneficiary under the policy. So, if you own a life insurance policy on someone else’s life such as your spouse, business partner or anyone else, that life insurance policy can be the subject of a senior settlement, if and when you might decide, or need to turn it into money.
The choice is yours- death benefit or senior settlement Now you know about more options – freedom – for making the most of the money you’ve invested in life insurance, and we hope that we have answered some of your questions about those options. You should definitely discuss this with your estate planner or financial advisor who can give you more information. You may also wish to visit our blog site If you think that you may have outlived your life insurance, and that you have better ways to use your investment money from that unwanted or unneeded policy, a senior settlement from Life Settlement Financial can unlock an immediate asset you may not have realized you possessed. It’s your future, and in this case it’s fair to say it’s a matter of life or death benefit.
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