If you have the pleasure of regularly interacting with senior citizens in your family or at work, you may have heard about life insurance settlements. As caregivers, friends, and family members of seniors, it’s important for you to understand the concept of life insurance settlements. Seniors rely on you as a trusted guide and, in some cases, an ambassador to technology and insurance policy review.
Many life insurance companies speak with their senior citizen policy holders about life insurance settlements, and seniors often emerge from those conversations with questions about their policies and their options.
What Is a Life Insurance Settlement?
A life insurance settlement means cashing out your life insurance policy. From the insurance end, this means settling up or possibly selling your life insurance policy to another insurer. For you or a cherished senior citizen in your life, it’s an opportunity for a short-term windfall or to re-invest in a new life insurance policy. Most people opt for a lump sum payment during a life insurance settlement in order to get their affairs in order at the end of their life.
Life insurance settlements happen via life insurance providers who will evaluate your age, health, and assets before finalizing paperwork.
Why Should Seniors Consider Life Insurance Settlements?
Some senior citizens have valid reasons to consider taking a life insurance settlement. Let’s take a look at why a senior citizen might want to accept a life insurance settlement:
- If retired people don’t have much savings and their heirs are self-sufficient, they may wish to settle their insurance policy and spend the money on travel — or something more practical and necessary, like housing and other living expenses. Seniors doing this should still set enough aside for their funerary expenses, easing the burden on their surviving relatives upon death.
- Life insurance premiums rise as consumers age. At a certain point, it might make financial sense to accept a settlement.
- Seniors age out of the need for additional coverage. For example, when they were younger, they might have needed heavier coverage to protect young children in the event of an untimely death — as an older parent with independent children, the need for larger coverage plans is less likely.
- Seniors who have no dependents or inheritors may wish to settle their life insurance policies to enjoy their money or make charitable donations.
- Some seniors are still active in the stock market; they may want to invest their life insurance settlement funds.
- Seniors need to immediately allocate the life insurance settlement funds to something important to them, such as a grandchild’s college education.
- A senior citizen has an immediate terminal illness (to receive an accelerated death benefit).
- After an emergency such as a storm creating damage in excess of a home insurance policy, life insurance settlements can provide additional funding for immediate fixes.
- As seniors age, their needs change. For some, a wheelchair-accessible, senior-friendly kitchen remodel is a lifeline. Life insurance settlement funds can help.
Help Senior Citizens Avoid Life Insurance Scams
While existing insurance agencies do call their policyholders regarding life insurance settlements, there are many scams out there too. Most scammers are trying to get a hold of senior citizens’ information.
Here are some tips to help senior citizens avoid being scammed:
- Your life insurance company won’t call you to ask about your policy number or personal information. If you are their policyholder, they already have that information.
- Ask for life insurance settlement paperwork and other statements in writing. This is a common request, especially from seniors, and they should be happy to send something via e-mail or postal service.
- Double-check your insurance information: Does it match the company they’re calling from?
- If you do decide to move forward with a life insurance settlement, you will need to sign paperwork before receiving money. If they start asking about bank account information before you have signed a paper, something’s fishy.
- Have a trusted family member, financial advisor, or attorney review the life insurance settlement paperwork prior to signing and returning it.
- Some companies will also prey on policyholders after big events such as a hospital stay. If a senior has had a hospital trip recently, and then receives a life insurance settlement call, it could be of concern.
Seniors wanting to find legitimate life insurance settlement opportunities should work with a reputable insurance broker. Life insurance brokers and company partners should have a healthy track record and legitimately guide their customers through the process.
You can help seniors evaluate these life insurance settlement opportunities using technology. Check with the Better Business Bureau and look at some Google Business reviews to determine if the opportunity is legitimate and trustworthy. A broker should be licensed, bonded, and insured, and they should not get defensive when answering questions about their licensure, experience, or qualifications.
Always remind senior citizens that life insurance settlement brokers work on commission, earning a percentage of the settlement. Additionally, you should help senior citizens connect with a reputable financial advisor, as life insurance settlements may impact their taxes.
If you’re ready to talk to senior citizens about life insurance settlements, try bringing along some printouts and other visual aids to explain the process.
