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Seniors: Now There’s More Value in Your Life Assets
(ARA) - In this tough economy, many seniors cringe when they open their mutual fund statement or go online to check the current value of their stocks and bonds. Because most of these assets are declining in value, seniors think their net worth is down. Yet many of them own assets that are currently worth more than they think.
Life insurance is an asset that can be turned into cash. In today’s marketplace, there is now a secondary life insurance market, where institutionally funded provider companies purchase policies from seniors they no longer want or need. And, where seniors can determine what their policy is worth by going through what’s called a “life settlement valuation.” A life settlement is not for everyone, however.
Life settlements work only when the insured is at least 65, according to Betsy Buckley, Certified Senior Advisor (CSA), a life settlement broker and owner of What Matters for Life, a financial services company that specializes in life settlements.
“Qualifying policies must have a minimum face value of $100,000. Many companies will only purchase policies with face values of $250,000, and provider companies tell us that they most frequently buy policies with face values from $1 million to $10 million. Insured men who are 75 plus and women who are 78 or older are more likely to get solid purchase offers,” says Buckley. She notes that life settlements can work for any type of policy, even term insurance.
Anyone who owns a life insurance policy that insures someone 65 or older, especially when that policy is no longer wanted or needed, can use the life settlement process to get a real current value. Policies owned by a trust, a business, a charitable institution, or by individuals all can be sold. It’s an easy process, with basically five steps, all of which focus on V-A-L-U-E.
V: Verify what policies that insure a senior are actually in force. Make a list of existing policies that have a qualifying face value.
A: Assess (or reassess) the reasons why this insurance was originally purchased and ask -- are those reasons still valid? If the intended beneficiaries have predeceased you, or your trust has been reduced in size, or you’ve retired from the company, chances are you have a policy you no longer want or need.
L: Learn more about life settlements. Basic information is best secured from a licensed broker who operates in your state. Let that person educate you and/or your estate planning attorney, CPA, financial planner or life insurance professional about any regulatory considerations in your state and about how the process works.
U: Undertake the life settlement application process. A licensed life settlement broker can help you fill out the required forms.
E: Evaluate the offers and record the valuation that the broker receives. Basically, the act of seeking a valuation is like going shopping -- there’s no “buying” unless you decide you like what is offered, at the price it is offered. It’s important to recognize that not every policy will qualify, and to acknowledge that there is no obligation to accept an offer.
Typically, the entire process takes between 4 and 12 weeks, depending upon the complexity of your policy and medical history. “There are no one size fits all formulas to determine a life settlement valuation. Each case is actually a ‘snowflake,’ and the value is determined by multiple criteria, including the life expectancy and current medical history of the insured, cost of premiums and current interest rates,” notes Buckley.
By spending less than 30 minutes completing forms and about an hour educating themselves, insured seniors will be able to convert a previously overlooked asset into cash.
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