No Settlement Over Life Settlement Debate

August 2005
Journal of Financial Planning;Aug2005, Vol. 18 Issue 9, p21
Academic Journal
This article focuses on the results of a study conducted by life insurance group Deloitte Consulting LLP in New York in 2005 on the life insurance market. Most impaired seniors needing cash should not sell their life insurance policies before death. While selling a policy is a better deal than surrendering it, keeping the policy is usually the best deal of all. It is a better deal that insureds needing cash should seek financing alternatives such as selling securities or taking out a reverse mortgage. Keeping a policy versus selling it assumes that the insured wants to pass money to heirs or charity. If not, a life settlement may make economic sense. The study revealed that life settlements paid a mere 20 cents on each face-value dollar. The study claims that 50 to 67 percent of the policies' intrinsic economic value is eaten up by life settlement transaction costs. Life settlement proponents argue that the study is seriously flawed because it is based on unreliable data provided in a single state.


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