We asked life insurance experts about the details of this asset, and how pursuing it could be a beneficial decision when faced with the cost of hospice or palliative care.
Jack Elder, J.D.
Vice President, Coventry
What is a life settlement and what do you wish more people knew about it?
Life insurance is a valuable asset. Most Americans have spent several decades investing in their life insurance policies in order to ease a potential hardship on their beneficiaries. But over time, many people find their life insurance no longer fits the situation they’d planned for all those years ago.
Selling that life insurance policy to help fund things they need today — costly and unexpected healthcare expenses, for instance — turns it from a financial burden into a helpful asset. What’s more, policyowners often realize there’s more value in that than either surrendering it to their insurance company, which often nets out a value less than the policy’s worth, or simply letting it lapse. That difference in total return amount can mean a lot in the difficult decision-making process of sending a loved one to costly end-of-life care.
Also remember that life settlements aren’t one-size-fits-all. Most types of life insurance qualify for life settlements, including universal life, whole life, variable life, survivorship, group life, and even term life. And when it comes to settling these policies, there are two options. People who still need insurance can retain a portion of their coverage and eliminate their ongoing premium payments, which is called a Retained Death Benefit. Others can settle the entire policy for one cash payout.
In the end, consider that policy owners have choices. The good news is that the market for unneeded life insurance policies is robust, mature, and highly regulated, which means more competitive offers for consumers. This gives policyowners the choice to sell their unneeded life insurance to a number of potential buyers. Partnering with one that meets their needs requires research to find the right fit.
Peter Hershon, CLU®, ChFU®
Senior Vice President, Coventry
What factors should policyowners consider when searching for a life settlement provider?
Like any financial decision, choosing to sell your insurance policy requires you to weigh all of your life settlement options in order to understand when selling makes sense. But because nearly 85 percent of people are unaware that it’s possible, this choice isn’t always a simple one. While researching different life settlement providers, making a decision on who to partner with comes down to a few key considerations:
Know how your estimates are being provided. You’ll come across two standard options in your search: instant-value calculators and direct communication via phone or email. The first option can offer policyowners a speedy estimate based on their answers to a few simple questions. Speaking with someone directly can take more time but allows the provider to evaluate your exact circumstances with more detail. Addressing the specifics of your health — like the need for hospice or palliative care — could make a difference in the range of options you’re being offered.
You’ll also want to consider their reputation. It’s worth looking into how long a life settlement provider has been in business, how much they’ve delivered to policyowners, and if they have any rankings or accolades to report. Sometimes the numbers speak for themselves, but long-standing experience in the industry says something, too; that a company has learned to adapt with every market shift and consumer interaction they have.
After taking all of these important factors into consideration and deciding what will best serve your healthcare needs, the last question you need as yourself is: Is this a company you trust?
Staff, [email protected]