First of all, I would expect nearly everyone in America to be familiar with Betty White. After starring in 2010’s wildly popular Snickers Super Bowl ad, this Emmy Award-winning 88-year-old Hollywood icon is clearly a major part of our pop culture. I can say with certainty, that the same cannot be assumed about the life insurance industry’s much less recognizable product: “Life Settlements”.
While this superstar could get top dollar endorsing practically any product or service she wanted, White felt so strongly about the value of life settlements and the need to create consumer awareness of the option, that she is endorsing life settlements. We that are in the industry really thank you, Bette White! Because of her, many older Americans who may know little about life settlements, and may, therefore, be wary of them are now being educated on its merits as a valuable financial product for seniors.
So, what are life settlements? Well, a life settlement, according to Wikipedia, “is a financial transaction in which the owner of a life insurance policy sells an unneeded policy to a third-party for more than its cash value and less than its face value.”
In basic terms, a life settlement, or “senior settlement”, as they are sometimes called, involves selling an existing life insurance policy to a third party—a person or an entity other than the company that issued the policy—for more than the policy’s cash surrender value, but less than the net death benefit. While Life settlements can be a valuable source of liquidity for people who would otherwise surrender their policies or allow them to lapse—or for people whose life insurance needs have changed, they are not for everyone.
Life settlements may make sense for people who no longer need or want their insurance policies, and would otherwise surrender their policies or allow them to lapse. But even then, you should proceed with caution. Consult with your broker or other “trusted” financial services provider. And finally, make sure that you are dealing with properly licensed entities who are aware of the confidentiality policies of the parties involved and understand the tax implications of the transaction.