3 Reasons Life Settlements Are Becoming More Attractive To Seniors

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Americans have more choices today than ever — when it comes to which television shows to watch, where to service our cars, and where to get our news. And the more informed we are about our options, the better our decisions will be.

But seniors seeking financial help during retirement should be just as informed about every viable option they have, including life settlements. Did you know that nearly half a million seniors lapse their life insurance policies each year? And as many as 90% of them wished they had known about their life settlement options, according to the Life Insurance Settlement Association (LISA).

Here are the three primary reasons life settlements are becoming more attractive to seniors today.

Reason #1: Scarcity of Retirement Funding

Retirement funding is so important that most young adults start putting money away in their 20s and 30s. Unfortunately, even those careful efforts often yield insufficient funds. One study found that the number of Americans over 75 who filed for bankruptcy tripled from 1991 to 2016 — with more than 62% citing high medical costs as a key cause.

For seniors on a fixed income, a life settlement can convert an unneeded policy into a meaningful lump sum — providing relief that Social Security and Medicare simply don't cover.

Reason #2: New Tax Laws

Several provisions in the Tax Cuts and Jobs Act have made life settlements a more favorable option, including the doubling of the estate tax exemption (to $11.2 million per individual and $22.4 million per couple), a new tax credit for non-child dependents, and the inclusion of premiums in the tax basis — which reduces tax rates on life settlements.

These changes have allowed many seniors who previously wouldn't have considered a settlement to take a second look at their options.

Reason #3: Better Education About Life Settlements

According to the Insurance Studies Institute, more than 500,000 seniors lapse their life insurance policies annually — and 90% of them reported they would have considered a life settlement if they had known about the option.

That's changing. As financial advisors take their fiduciary responsibilities more seriously and brokers like Allan Silverman make it their mission to educate clients, more seniors are discovering that their policy is worth far more than the surrender value their insurer would offer.

Life settlements can convert an unprofitable policy into a valuable source of retirement income. If your circumstances have changed since you bought your policy, it's worth exploring.