by Michael Rivezzo
Senior citizens are raising cash by selling their life-insurance policies to investors that will profit from them when they die. Policies worth $10 billion face value were sold last year alone with a $8 billion increase from 2002.Federal lawmakers are starting to get worried about this ever increasing trend because it is unregulated with no one watching out for individuals who sell their policies or the investor buying them. Seniors who need cash are starting to sell their policies to third-party investors for a substantial lump sum, then soon transferring ownership of their policy to the investor. This investor will continue to pay the insurance premium and becomes the beneficiary.
Some advisors are telling clients to also be cautious because there is not a real indicator to determine how much a policy should actually be worth and also the market for life settlements isn't very efficient. Advisors suggest that the only people that should be selling their polices are people in dire need of money who don't have no where to go and also people whose policy has outlived their use. Many seniors that have sold their policies already have children that are independent and they have no need for the money so they are cashing them out early.
http://www.cbsnews.com/stories/2009/09/30/business/moneywatch/main5353961.shtml
http://www.newschief.com/article/20091002/NEWS/910025031/1053?Title=Some-seniors-cashing-out-life-insurance-policies
http://online.wsj.com/article/SB10001424052748704471504574447350852232082.html
It can be really difficult to determine the price of such policies. Especially when auditing a company, accountants need to understand the measurements in order to determine whether the amount reported is correct. Those who cash in their life insurance policies aren't without paying taxes and other applicable fees, therefore in my opinion it may not be the best option if in need of money.
ReplyDelete-- Lisa Matthys