April 17, 2020
It is no exaggeration to say that we are in dire, if not unprecedented times as we weather the novel coronavirus pandemic. Even when the risk of the virus spreading has subsided, we will have to deal with the economic repercussions. The International Monetary Fund released its economic forecasts this week and the data shows that the ensuing recession will be far greater than that of the 2008 financial crisis, and possibly even the Great Depression. The IMF’s data shows that there may be a -3% global growth rate as a result of this “Great Lockdown,” the 2008 financial crisis resulted in only a -0.1% growth rate in 2009.
Of course no one could have prepared for this, but there is a specialty financial tool available to retirees who are finding their planning has had the rug pulled out from under it- no fault of their own. There has been a growing trend in seniors looking to tapping the market value of their life insurance policy, and this tool will undoubtedly help many in the trying times we are facing. To take advantage of this option, a life insurance policy owner (who has a policy of at least $50,000) can contact a state-licensed life settlement provider or broker, or reach out to one of our experts here at Q Life Settlements who would be happy to answer any initial questions. Then after an initial information submission (along with a policy illustration) the policy can be evaluated for its market value- which is some amount less than the death benefit. A life settlement makes sense when the market value is greater than the cash surrender value (if the policy has any), and there is no longer as great a need to keep the life insurance policy in-force. After completing the life settlement, you receive the full market value of the policy (this can be cash, a “retained death benefit”, or even an annuity or long term care benefit plan) and the policy’s ownership and beneficiary designations are changed over to the buyer of the life settlement. The new owner makes all the premium payments from that point on, and may check in periodically to make sure their records are up to date.
When a life insurance policy is no longer meeting your current needs—maybe the premiums are becoming unaffordable or you just don’t need the same coverage as when the policy was issued—there are three scenarios that may make a life settlement an attractive option:
- Seniors who have been impacted by the recent market trends and no longer have the security that they had planned, a life settlement can be of tremendous benefit. In this scenario, the life insurance premium is likely looking more like an unnecessary bill, so if you are in this boat make sure to look into the policy’s market value before letting an unwanted policy lapse.
- Seniors who are concerned about the future uncertainty may be interested in using a life settlement to get the most value for their life insurance policy now, and then purchase a more suitable product like an annuity.
- For seniors who landed on their feet in all of this, they may be interested in leveraging a life settlement to access immediate liquidity in order to invest back into the stock market to, as the saying goes, “buy the dip” that we are experiencing.
For a qualified senior, life settlements can provide significant value—above and beyond the policy’s cash value. Be sure to keep all of your options in mind as we navigate these turbulent waters together and know that we are here to help!