Selling your life insurance policy
Here’s an area of controversy and concern. There’s a new industry that’s sprung up called the “Secondary market for life insurance”. Here’s how it works. It’s mostly for elderly or ill people. The origination of this started some years ago when terminally ill people who needed financial help turned to their life insurance policies and sold them to investors. They got a percentage of their insurance amount based on how long they were expected to live. This may have helped some people get through their last years but also if they had beneficiaries that depended on them, those people received less than the original insurance amount i.e. whatever was left, if anything, from the amount they were given as settlement on the policy.
The name for this practice is the subject of viaticals or viatical settlements. This business has now grown beyond the original small market to an ongoing large market described by the Chicago Tribune as the $13 billion secondary life insurance market and one promoted by insurance agents.
Recently some abuses have been investigated by the “ever diligent” Elliot Spitzer for the potential abuses by a company in this business called Coventry First, LLC a large buyer of life insurance policies. As the Chicago Tribune quoted Coventry: “Coventry issued a strong denial, arguing that its existence has helped break insurance companies’ hold on policy owners.”
Here’s some advice I agree with and again quoted from the article: “Policy owners need to determine if a life settlement is in their best interest in the first place.” Also, “You always want to get competitive bids in writing.”
Also, from my point of view, really think what it means to your beneficiaries. If someone is willing to pay that much, think of the value that it would mean to those you care about. Think both about your financial situation and your beneficiaries. Really take your time, look thoroughly at all your options and if you’re going to go ahead shop it hard.
