Americans ages 65 and older forfeit $112 billion in benefits annually by lapsing or surrendering their life insurance policies, according to new research unveiled at the Life Insurance Settlement Association’s (LISA) Fifth Annual Institutional Investor Life Settlement Conference.
John Welcom, founder and chief executive officer of Welcome Funds, and Darwin Bayston, president and chief executive officer of LISA, presented these findings at general session of the gathering. The event was held at event took place on Monday at The Ritz-Carlton New York in Battery Park.
“The potential size of the life settlement market in the U.S. is simply astounding,” said Welcom. “There are tens of thousands of American seniors who are collectively forfeiting billions of dollars in death benefits each year because they lapse or surrender their policies to the insurance companies and, as a result, those policies are terminated.”
A life settlement is the sale of a person’s life insurance policy to a third-party investor. In a life settlement, the policy’s owner transfers the ownership of that policy in exchange for an immediate cash payment from the buyer. Candidates for life settlements are typically 70 or older, with a life insurance policy that has a “face value” (death benefit) of more than $100,000.
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Welcom provided detailed analysis of the data regarding the potential size of the life settlement market in which he isolated the types of policies that are best-suited for a life settlement.
“Our research indicates there are roughly 250,000 of these policies that are lapsed or surrendered each year, with a combined face value of more than $57 billion,” said Welcom. “Based on the publicly available data regarding the number of closed life settlement transactions last year, we’re currently serving less than 1 percent of this total possible market, so there is tremendous potential growth in the years ahead.”