Leveraging policies for cash to offset planning shortfalls

by Wm. Scott Page

In late 2021, the term “inflation” started creeping into the national consciousness. By the spring of 2022, consumers throughout the United States saw prices rise for many everyday household expenditures. Soon, interest rates were increased to counter-balance inflation, and by the end of the year, consumers, particularly seniors, were seeing extremely dark economic clouds on the horizon.

The life settlement market has been in a sharp state of inflation reaction for most of the year, and rising interest rates have also changed perspectives. Here are some of the issues that have impacted the life settlement industry in 2022 and a look ahead to the coming year.

Life Settlements Counter Inflation

Premium payments may become onerous as costs rise, particularly for those operating with a fixed-income mentality. Budgets are tightening, and many seniors are not seeing their money go as far as it once did – and they’re looking for some relief. A life settlement may provide the answer. Because inflation has the potential to chew away at retirement nest eggs (in both the short and long term), we are telling clients with whole and universal life policies that now is a great time to perform a policy appraisal as part of an overall assessment of coverage.

For example, a senior client with a $1 million universal life policy may be blowing through $6,000 – $7,000 per month to keep it in force. Given rising costs, they are likely looking at those payments and seeking flexibility. A senior client with a $1 million policy could often expect a cash payout from a life settlement of about $250,000. They would go from paying a hefty premium to having an additional $250,000 to invest. Options abound for the payout and the roughly $80,000 annual premium payment that they will no longer be sent directly to the insurance company.

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For Broker use only. Not intended for the general public.

The information included in this transmission is intended for professional financial advisors and other practitioners in the financial services and investment advisory trades. Indications of interest rates, commission rates and other financial data within life insurance, annuity, mutual fund and investment instruments should be verified through the individual providers.

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