Life settlements may be making a comeback in 2014. Since 2008, the financial landscape has changed so much that people are now making different decisions in regards to their financial longevity. No longer do today's seniors have a straightforward financial future. With many options appearing and returning to the market, their financial future is now filled with many choices.
The Rise of Life Settlements
The term life settlement describes the sale of any existing life insurance policy to any third party.
Life settlements are typically sold for more than its cash surrender value, or more than the sum insurance companies are willing to pay their policyholder, typically in the event of the policy being voluntarily terminated for whatever reason. Although the life settlement is sold for more than its cash surrender value, it's never sold more for its net death benefit.
People choose to sell their life insurance policies for various reasons. Though, it's never really been a popular option for settling life insurance policies -- and, that's if people ever really had a life insurance policy anyway.
That's slowly changing. Those who do have life insurance policies might be looking to settle them eventually. What better time to get started than now?
Nowadays, 42 states now have legislation in place to regulate life settlements for people who want the option. Though, an industry can't thrive if there isn't a supply and demand for the product. According to several industry experts, that looks to be the case in 2014. Let's look at some reasons why that might be the case.
5 Reasons To Expect A Boom In Life Settlements During 2014
Life settlements may experience a boom in 2014. Even though the year's half over, that boom will set the foundation for their rising popularity in 2015 and beyond.
1. People Want Decreased Life Coverage
Most people with universal life insurance may experience increased interest rates after experiencing a prolonged period of low rates. Now that their associated premiums are getting higher, life settlements provide an alternative for those who want less coverage or let their policies lapse.
2. Older Seniors No Longer Need Extra Coverage
Older seniors, or those well past 65, don't need all of their life insurance coverage into retirement. Life settlements may provide them the alternative investment they need.
3. Bigger Pension Funds Are In The Market Now
Nowadays, larger pension funds are in the market. Since the interest rates are low, investors are now looking for alternatives. Life settlements provide those large income investors a better long term investment options that doesn't directly correlate with the bond and stock markets.
4. An Untapped Market
There's an untapped market out there: smaller policies under $500,000. Many investors now realize the sheer potential in that market, and are now developing simpler underwriting methodologies to make acquiring and managing their policies financially possible.
5. Consumers Are More Aware Of Life Settlements
Now, consumers are aware of life settlements. As many as 42 states have already implemented some type of legislation for life settlements. Six states have already fully adopted life settlements.
Organizations like the National Conference of Insurance Legislators now also require insurance companies to inform seniors that life settlements exist as an option for converting lapsed and/or surrendered life insurance policies.
Life settlements might not be for everyone, but they're a viable option for consumers looking for alternatives apart from lapsing or completely surrendering their policy.