A recent article in the NY Times, titled Raising Cash From the Less Usual Places, seemingly tries to do a fair and balanced look at ways to pay for elder related expenses. They of course touch on life settlements. However, my gripe is this, to the uneducated life settlements are portrayed and understood to be a tool for desperate seniors who have nothing else to sell.
Life settlements have helped numerous seniors out of tough spots, prevented foreclosures and wiped out crippling debt. But for every down on their luck senior who sold a policy, there are 10 others who were affluent or even down right wealthy when they sold their life insurance policy.
As much as life settlements are depicted as a strategy for the needy, they are really a wealth or estate strategy. Consider this, the average life settlement is for a life insurance policy with a $1.7million face, while the average in force policy is less than $350k. There are some ancillary considerations for this discrepancy, but at the end of the day, rich people are selling policies not poor people.
So while reporters and misinformed politicians are reminding everyone that your food stamp eligibility might be affected if you sell your policy, the rich keep selling their policies like just another asset. So please save us the sob story about poor grandma who was broke and someone took advantage of her to buy a life insurance policy on the cheap. If Grandma was really broke, chances are she stopped paying her premiums long ago.
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