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During their working years, people often buy life insurance as a safety net in case of tragedy. When a forty-something with kids, a mortgage, or other debts suddenly dies, life insurance is usually necessary to ensure their family doesn’t suffer even more long-term because of the loss of their income. However, for an older retiree, expensive life insurance often becomes a burden. Without dependents or a mortgage, the retirees’ end-of-life expenses will be reduced from what they expected when they took out the policy or policies. That’s not to say no life insurance is necessary for retirees, but it can be a challenge to evaluate just how much. That’s one of the many places a financial advisor enters the picture.
Debt vs Expenses
Retirees today have more debt than any generation in retirement before them, meaning your clients will definitely be thinking about what happens to that debt after they pass away. However, it’s also important to remember that a life settlement today can improve quality of life in retirement, and that getting rid of an unnecessary policy will also save your clients money on the premium payments. In fact, cashing in on an unnecessary policy could both put existing debts to rest and leave the client with money in hand to spend now.
For example, one of our recent success stories involved an older couple who lived five hours from their only grandchildren. They wanted to move closer, but lacked the lump sum they needed to make the transition. Through a life settlement, they received $175,000 for a policy! They used that for the down payment on their new home.
When to Consider a Life Settlement
In a life settlement or viatical settlement, the owner transfers the policy to a new owner 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. If you have clients with an unnecessary policy or policies that meet these criteria, consider advising them to look into a life settlement or contact us at Life Settlement Advisors today.