In today’s dynamic and uncertain financial landscape, it is crucial for older clients to explore all available options to maximize the value of their life insurance policies. Surprisingly, a significant number of policyholders remain unaware of the potential benefits of selling their in-force policies. This article aims to shed light on the untapped opportunities and financial advantages that older clients could unlock by considering life insurance settlements. By delving into industry data and showcasing the value potential, we aim to highlight why more older clients should seriously consider selling their life insurance policies.

The Untapped Potential

The Life Insurance Settlements Association (LISA) is the oldest and largest organization representing participants in the life settlement industry in the United States with a current membership of more than 90 Companies, doing business in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. According to LISA, an estimated 9.28 million policies were either lapsed or surrendered in 2021, with a staggering total face value of $624.2 billion. Shockingly, only a mere 3,100 policies were sold to a third party as a life settlement, leaving a substantial gap between the number of policies abandoned and those that could have been sold. It is evident that many clients are missing out on significant value for their policies.

The Benefits of Life Insurance Settlements

Exploring Financial Gains

Clients who find their policies unwanted, unneeded, or unaffordable often believe they have no other option but to lapse or surrender them. However, they are often unaware of the alternatives available, one of which is selling the policy through a life insurance settlement. By engaging in a life settlement, policyholders can unlock substantial financial benefits.

In 2022, LISA reported that consumers received a staggering $770 million for the sale of their unwanted life insurance policies[^1^]. Moreover, the difference between the total amount paid to consumers and the amount they would have received if their policies had been lapsed or surrendered amounted to an impressive $610 million[^1^]. On average, a policyholder involved in a life settlement received $250,500 after completing the transaction[^1^]. These figures highlight the immense financial opportunities that can be gained through life insurance settlements.

Overcoming Misconceptions

A significant reason behind the low number of policies sold is the lack of awareness and misconceptions surrounding life insurance settlements. Both clients and their advisors may be unfamiliar with how the market operates, leading to missed opportunities. Advisors often fail to realize the potential value of life insurance settlements and neglect to discuss this option with their clients.

Identifying Limitations

While life insurance settlements present an attractive option for maximizing the value of policies, it is important to acknowledge certain limitations.

Suitability of Policies

Not all policies are suitable for sale through a life settlement. Final expense policies, for instance, are typically too small to attract investors’ interest. Additionally, policies held by young and healthy individuals may not meet the criteria for a successful life settlement transaction. Policies with high cash value relative to the face value or substantial policy loans may also pose challenges for potential buyers.

Time-Sensitive Policies

Term policies nearing the end of the term or conversion period often lack inherent cash value. Consequently, selling such policies may not yield significant financial gains. However, it is crucial for policyholders to carefully evaluate their options and consider other potential advantages before making a decision.

The Bottom Line: Unlocking Hidden Value

The primary takeaway from these findings is that countless older clients are unknowingly leaving substantial sums of money on the table. By considering life insurance settlements, they can avoid walking away with nothing and instead generate substantial cash amounts.

For those clients whose policy’s original purpose no longer aligns with their current needs, selling the policy often proves more financially advantageous than surrendering it for the cash value alone. In fact, selling the policy can generate significantly more cash than the cash surrender value.

It is imperative for older clients and their advisors to educate themselves about life insurance settlements and the potential financial benefits they offer. By embracing this alternative, clients can make informed decisions, unlock hidden value, and secure a brighter financial future.

If you would like to receive a valuation on your life insurance policy, please click this LINK and complete the form, and we will be happy to let you know how much cash you could receive by selling your life insurance policy.