Life Settlements in the Age of Covid-19

If you are one of thousands of seniors nearing retirement who have been impacted by the coronavirus pandemic, you are likely contemplating how to weather the current economic storm. With a turbulent stock market, plummeting interest rates, and significant job losses, the financial fallout runs deep.


For one, seniors who have lost their jobs may find it difficult to regain their former compensation or even re-enter the workforce at all when the economy begins to rebound. And for those who opt to offset lost earnings by collecting Social Security before they hit full retirement age, the resulting lower monthly payments may result in greater losses in the long run.


According to the Kaiser Family Foundation, half of all seniors have savings of $83,850 or less, a quarter have less than $9,650, and about one in ten (12%) have no savings at all. 2016 data from the same group reveals that the average senior household with a rainy day fund invested about one fifth of their total savings in the stock market — and households in the top savings quintile contributed an average of 36% of their nest egg to the stock market. For seniors within these two groups, the current volatility in the stock market raises legitimate concerns about the likelihood of recovering lost retirement savings.


The advantages of a life settlement

If you own a life insurance policy, you possess a very valuable asset. Because life insurance policies are not tied to market and economic conditions, the stock market cannot impact your policy’s face value, which is guaranteed so long as your premiums are paid. This means that a $200,000 face value two months ago will still be worth $200,000 two months from now, in spite of the turbulence in the stock market. This also means that, with COVID-19 in the picture, life insurance policies are more valuable than ever to third party investors, and that the overall demand for life insurance policies is high — which puts policyholders in a position of advantage.

If the recent economic downturn has impacted your pension, resulted in a job loss that has reduced or eliminated your household income, or compromised your budget, you may want to consider selling your policy in a life settlement. A life settlement offers a one-time cash payment that equals more than the policy’s surrender value but is less than its face value. Generally, cash payments range from 50% to 85% of a policy’s face value.


Selling your policy yields a host of powerful benefits. For instance, life settlements can help supplement underfunded retirement accounts by converting an otherwise untapped financial asset into immediate cash. In addition to the lump-sum settlement from the sale of the policy, the premiums paid to keep the policy active are no longer required, which offers policyholders one less expense to think about. Other benefits worth considering include:


    • There are no fees or out-of-pocket expenses involved with pursuing a life settlement.
    • The lump-sum cash payout from a life settlement is often tax-free.
    • You are free to spend the proceeds from a life settlement any way you want; this flexibility is especially important during economic downturns.
    • The life settlement process can be completed within ninety days or less.
    • There is no need for in-person meetings during the pandemic; the life settlement process can be conducted remotely from beginning to end.

The bottom line

In this time of crisis, many policyholders will face a decision about whether or not they can make their next premium payment. As you assess your financial needs and goals, be sure to also ask yourself if you require your insurance policy for your beneficiaries, if you need cash, and if there are any other assets that you can sell.

For anyone looking to bolster their finances, a life settlement can be an instant lifeline. You can use the funds to pay pressing retirement expenses, reinvest the money to generate new retirement income, cover healthcare costs, or have cash on hand for unforeseen necessities.

Since life insurance policies hold significant resale value, selling yours is a more lucrative option than lapsing or surrendering your policy, or even liquidating investments, like stock holdings, in a down market and locking in losses. As a means of immediate economic relief, a life settlement is a practical and achievable option, especially in today’s financial climate.