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More than 8 in 10 seniors unaware of life settlement option

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The majority of seniors who own a life insurance policy are not aware of the fact that their policy can be sold for an immediate cash payment, according to a survey just completed by Coventry. The survey of 604 seniors, found that 86.1 percent were not aware of the option to sell their life insurance policies.

This is especially troubling because thousands of seniors lapse their policies without even knowing that alternatives are available, including a life settlement. The new data is consistent with previous industry surveys covered by LifeHealthPro, including findings that:

  • 90 percent of seniors who lapse policies without knowing about a life settlement indicated they would have considered that option had they known about it; and that

  • 79 percent of clients feel advisors should inform them about a life settlement option.

According to the Life Insurance Settlement Association (LISA), when life insurance policy owners sell their policy, they receive an average of seven times the amount of the policy’s cash surrender value. This is no small matter to the seniors we serve.

Consider this story: A car dealership owner originally purchased a $488,000 life insurance policy to fund a buy/sell agreement with his business partner. After the business dissolved, his family continued to pay the premiums, but eventually decided the coverage was no longer needed.

He was planning to surrender the policy back to the insurance company for $6,800, then learned he had another option: to sell his policy to Coventry First for $80,000. That’s more than 10 times what he would have received from the insurance company. The proceeds were divided among his three children, which they used to supplement their income.

Seniors need to be made aware of all options available to them. Based on the counsel of their trusted advisors, they may choose to lapse or surrender the policy. They may also elect to find an alternative means for keeping it in force. Or they may opt to sell the policy to a third-party.

Whatever they choose, it gives advisors an opportunity to get in front of their clients and grow their business.