Reasons for Life Settlement
The life settlement option is pursued for a variety of reasons. Why someone with an existing life insurance policy would sell their policy can be unbelievable until the policy lapse rate data is considered. Life insurance carriers figure around a 90% policy lapse rate when pricing life insurance products. This means life insurance carriers expect the majority of life insurance policies to lapse. As a policy owner, lapsing a life insurance policy returns zero value unless there is a cash surrender value. Either way, if possible, a life settlement will provide more value.
Why life insurance lapse rates are so high is due to many reasons. Escalating premiums, increased term conversion premiums, changing needs, retirement expenses and healthcare costs are only a few of the reasons why a policy owner might lapse their life insurance policy. Unfortunately, policy owners who may qualify for a life settlement often lapse their policy BEFORE understanding the life settlement option. There are clear reasons WHY someone would want to sell their life insurance policy, clear data showing policy lapse happens often, and a clear opportunity to understand & pursue life settlement.
