NEW YORK (MainStreet) After John Smith purchased a $2 million universal life policy in 2003, the recession took a toll on his estate, and the 73-year-old turned to his policy for financial help. The retiree was paying nearly $40,000 in yearly premiums that he could no longer afford. Smith met with his financial advisor and was informed that the surrender value, including fees and other charges, would be $72,000 less than what he'd paid into it over the years, which was $250,000.
That's when Smith turned to life insurance settlement.
"We ended up paying him $515,000 cash or nearly three times the surrender value his insurance company offered," said Scott Page, president and CEO of the Lifeline Program. "We assumed all his premiums from that point and he was freed of the burden of his monthly payment with more than half a million dollars in fresh cash he could spend as he wished."
Life insurance policies can be acquired by companies, such as Lifeline, which make up a secondary life insurance market. However, imagine how morbid life would feel if a third party had a vested interest in your death benefit.
Lawmakers in Texas passed a bill enabling a policy holder with a face value more than $10,000 to sell it through life settlement for the purpose of using the proceeds to pay for long-term care services.