With the slumping economy driving many older Americans into poverty, there is another asset besides the equity in your home that could be turned into cash - your life insurance policy.
I am not talking about buying a policy in order to flip it and sell it to an investor. That’s called Stranger Owned Life Insurance (STOLI), which has been all but outlawed in most states because it’s little more than a scam that aims to rip off insurance companies. And you put your life in the hands of a stranger-investor who profits if you don’t live too long.
Now, however, reputable elder law attorneys and the AARP magazine suggest that if you have a universal or whole life policy for which you’re still paying premiums, or which you and your heirs and survivors don’t need, you may sell it as a “life settlement.”
The proceeds of such a settlement, minus a broker’s fee, would be less than the death benefit but more - maybe much more - than the cash surrender value.
The life settlement, which is especially useful for those facing costly medical bills, grew out of “viatical settlements” for terminally ill AIDS patients who did not have sufficient insurance. They paid for their care by selling their insurance policies. Those settlements ended as drugs prolonged the lives of HIV-positive patients.
While dying AIDS victims were able to get 30 percent or more of the value of the death benefit, according to the AARP magazine, most life settlements today pay between 15 percent and 25 percent on universal and whole life policies and on term policies that are convertible. Elderly people with health problems can get more.<br …
Read the original article at Philly
