The Benefits of a Secondary Market for Life Insurance Policies

Submitted by Ronald W. Rassmussen

Just as Fannie Mae and Freddie Mac created an active secondary market for home mortgages, life settlement firms are now playing a similar role for the sale of life insurance policies that the owner no longer needs or wants. The buyer becomes the new owner and beneficiary of the life insurance policy, pays all future premiums and collects the full amount of the death benefit when the insured dies. The industry has really taken off in the last five years. A life settlement is the sale of a life insurance policy for an amount greater than the cash surrender value of the policy. The policy holder should be 65 or older, own a term, universal life, or survivorship type of policy, in an amount of $250,000 or greater, for at least two years. Among the reasons for considering a life insurance settlement is: premiums no longer affordable; policy might be lapsing or surrendered, estate taxes might have changed; outlived beneficiaries; or changes in health.

Some of the benefits include: Capital for annuities or other financial investments; pay off a mortgage; provide cash gifts to family members; or for charitable giving. A life settlement broker is a person who represents the seller of the life insurance policy and can comparison shop for life settlement offers.

CPAs, financial advisors, attorneys, and life insurance agents all have a fiduciary responsibility to their clients to make them aware of the market for life insurance settlements.

Ronald W. Rasmussen is a Life Settlement Broker and can be contacted at (760) 788-0671 or email RAZ2000@webtv.net.