The National Association of Securities Dealers says consumers should make sure they understand the ramifications before selling in-force life insurance policies.
Life settlement transactions "can be a valuable source of liquidity for people who no longer want or need their current policies," NASD Chairman Mary Schapiro says in a statement issued by the NASD, Washington.
But transaction costs can be high, determining whether a policy is selling for a fair price can be difficult, and a transaction can cause problems for some insureds, Schapiro says.
"The best advice is to proceed with caution," Schapiro says.
Competition in the life settlement market is intense because some have estimated the market could prove to be a $100 billion market, NASD officials report.
The NASD is recommending in an investor alert that consumers consider factors such as whether they will have trouble getting new life insurance coverage after selling existing policies.
