Don't Leave Money on the Table: Why a Life Settlement Deserves a Look

Imagine owning a valuable asset, something that could provide significant financial relief or even open up new possibilities. Now, imagine letting that asset wither away or selling it for pennies on the dollar simply because you didn't realize its true worth. For many, a life insurance policy, particularly one they no longer need or can afford, falls into this category.

Before you reduce the death benefit of your life insurance policy, surrender it for its cash surrender value, or, even worse, let it lapse, there's a crucial step should take: evaluate a life settlement.

At TRC Financial, we understand that life circumstances change. A policy that once served a vital purpose might no longer be necessary. However, that doesn't mean its value has vanished.

A Century of Rights, Yet Widespread Unawareness

It might surprise you to learn that the right to sell your life insurance policy is not a new concept. In fact, as early as 1911, the US Supreme Court affirmed this right in the landmark Grigsby v. Russell case.

The court unequivocally ruled that a life insurance policy is a personal asset that a policy owner may transfer without limitation.

Despite this century-old legal precedent, the reality is that most people remain unaware of this option. This lack of awareness can lead to massive losses – hundreds of billions of dollars, according to some estimates – as policies are surrendered for a lower market value or simply allowed to lapse, providing nothing to the policy owner or their estate.

What is a Life Settlement?

A life settlement is the sale of an existing life insurance policy to a third party for typically a lump-sum payment that is greater than the policy's cash surrender value, but less than its face value (the death benefit). The buyer then becomes the owner and beneficiary of the life insurance policy and is responsible for paying any future premiums.

Why Evaluate a Life Settlement Before Other Options?

Consider the alternatives:

• Reducing the Death Benefit: While this may lower premiums, it also diminishes the financial protection your policy offers. A life settlement could provide a significant cash infusion while eliminating premium payments entirely.
  

• Surrendering the Policy: Surrender values are often significantly lower than what a policy is actually worth on the secondary market. A life settlement can unlock substantially more value.
  

• Lapsing the Policy: This results in a complete loss of any potential value. A life settlement ensures you receive something in return for an asset you no longer need.

For Advisors: A Fiduciary Responsibility

For advisors, discussing life settlements with clients isn't just good practice – it's often a fiduciary responsibility. By failing to explore this option, advisors may be overlooking a solution that could significantly benefit their clients. Introducing the possibility of a life settlement demonstrates a commitment to exploring all available options and maximizing potential client outcomes.

Is a Life Settlement Right for Everyone?

Not every life insurance policy is a candidate for a life settlement. Typically, policies with a death benefit of $250,000 or more and belonging to individuals over the age of 65 (or younger individuals with lower life expectancies) are the most likely to qualify. However, it's prudent to have each policy evaluated on its own merits.

Take the First Step: Evaluate Your Options

Before you make any decisions about your life insurance policy, take the time to understand its potential worth on the secondary market. Contact TRC Financial today or visit our website at https://www.trcfinancial.com/life-settlement to learn more about the process and how we can help you and your advisor determine if a life settlement is the right choice for you.

The tax and legal references are provided with the understanding that neither TRC Financial, nor M Financial Group are engaged in rendering tax, legal, or actuarial services. If tax, legal, or actuarial advice is required, you should consult your accountant, attorney, or actuary. TRC Financial should not replace those advisors.