What are the economic motivators for a policyowner to give up life insurance in favor of a life settlement?
The economic motivators that move a policyowner to do a life settlement relate to the cash cost of keeping the policy in force, changes to economic priorities for seniors and attractive alternative uses for the cash proceeds from a life settlement. Cash cost to keep policy in force: For a universal life insurance policy with non-level premiums, average annual premiums may have reached 5% to 6% of the policy death benefit by the time the insured reaches age 75. The annual increase to the mortality charge adds 10% to these premiums each year. For example, at age 75, the average annual premium on a universal life policy with a $500,000 death benefit could range between $25,000 and $30,000 ($2,083.33 – $2,500 per month), and increase at the rate $2,500 to $3,000 every year thereafter (e.g. $37,500 – $45,000 at age 80)!
Related Questions
- The American Council of Life Insurers (ACLI) says there is no economic justification for a policyowner to do a life settlement. How do you refute this statement?
- What are the economic motivators for a policyowner to give up life insurance in favor of a life settlement?
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