The economic downturn has forced seniors who used to be able to rely on selling a home and investment income to pay for the costs of senior housing and care, to look for other ways to fund these changes.

One funding tool that is rapidly growing is selling an existing life insurance policy in the Life Settlement market. A Life Insurance Settlement is the sale of an existing life insurance policy, while the policy holder is still alive. The seller of the policy will receive a lump sum payment for their policy and will no longer be responsible for paying the monthly premiums.

The Insurance Studies Institute of America projects that there will be over $31 billion of Life Settlement transactions annually within the next 10 years. Most of this growth will be driven by Baby Boomers looking for sources of liquidity to fund retirement, senior housing and long term care.

According to New Retirement, some reasons for seeking a Life Settlement include:

• The Life Insurance payments are burdensome
• Your policy does not perform as expected
• You require additional funds for medical expenses
• A need to pay for a long-term care policy
• You wish to upgrade your current life insurance policy
• Divorce makes the policy unwanted
• Your children are grown and no longer require the protection
• You wish to use the money now for a vacation home or travel
• A business is closed
• You wish to give the money to a charity

Though a Life Settlement can be a huge financial boon, there are some disadvantages to selling an insurance policy in this manner: your heirs will not benefit, it could have a negative impact on low income assistance, the proceeds could be claimed by creditors, and there are tax implications.

Consult your financial advisor to see if Life Settlement is right for you or your loved one.

– Elizabeth Thielke