Life Settlements and the Duty to Disclose

(2 Minute Read)

Recently, attorney Jim Maxson published an article detailing an interesting court case in which the owner of a life insurance policy valued at $7 million determined the policy was no longer worthwhile to them. The monthly premiums were simply too high and the full amount of the policy didn’t justify the means.

When the policy owner inquired to the insurance carrier about ways to reduce their cost, the owner was given two options: 1) continue paying the premiums, or 2) surrender a portion of the policy to reduce the monthly premium. At no point did the insurance carrier suggest that the policy owner look into the life settlement market, where someone may have been willing to buy a portion of the policy, providing the owner with a lump sum.

So the owner surrendered $5 million worth of the policy. But when the owner found out about the other option—the life settlement option—they filed a suit against the insurance carrier.

Ultimately, the court found that there was obvious monetary harm done to the policy owner because of the lack of disclosure from the insurance carrier.

Even though the life settlement market has been around for 20 years, most life insurance carriers still won’t acknowledge it as a viable option for seniors with policies that just don’t make sense for them anymore. As life settlements continue to become a more popular option, you can be sure that there will be more court cases like these.

Letting a policy lapse or surrendering it for practically nothing just doesn’t make sense while the life settlement market exists. If you or one of your clients has a policy they no longer need, a life settlement may be an option to ensure you still get worth from your policy. Complete our qualification calculator [external link] to see if it’s a viable option for you.

I would be happy to answer any questions you may have about this or any other life settlement topic. I can be reached at 888-849-0887 or llagrotte@lsa-llc.com.

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