When Families Change, Life Insurance Needs Can Change Too
When someone takes out a life insurance policy in their ‘30s, ‘40s or ‘50s, that purchase is predicated on assumptions about the future of the policyholder’s family. But unexpected changes to the family structure can occur over the years, and for seniors those changes might lead to the consideration of a life settlement.
Insurance For Your Family: What You Must Know
The most common family change, with obvious insurance ramifications, is divorce. Often a person buys life insurance, names their spouse as a beneficiary and later gets divorced, voiding the need for a policy that will support the surviving spouse. If the policyholder is over 65 and paying into premiums unnecessarily, a life settlement can turn that situation around and provide a windfall rather than burdensome expenses.
In the same way, a senior who undergoes a divorce and then gets remarried later in life may want to schedule a life insurance check with their broker to guarantee that the coverage serves the needs of the policy owner and his or her new spouse. A new policy with a new beneficiary might not be practical or affordable if the remarriage happens late in life, but that new family could be eligible for a cash windfall through a life settlement that they can enjoy in their retirement years.
Insurance Policy Review
If an insurance policy is structured to benefit children or grandchildren, the addition of family members through birth or adoption could prompt an insurance re-evaluation. Some policyholders, particularly seniors, opt to sell their policies and use the proceeds for college funds or other legacy investments rather than an insurance policy that will pay out after their death. Seniors who create educational funds for their grandchildren can have the benefit of watching those young people take advantage of higher education and make steps toward building their futures.
Life Events Lead to New Insurance Needs
Change is inevitable in life, and changes to families—whether welcome or unwelcome—can create new investment and insurance needs. Seniors with a thorough understanding of their financial options will provide the richest opportunities for themselves and their loved ones, and those facts are available from trusted financial advocates or specialists like the ones at Magna Life Settlements. If you have seen changes in your family and believe that a life settlement could be a better use of your resources than an unneeded life insurance policy, set up a call with a Magna advisor or try our simple life settlement calculator today.
Insurance Overload: When Seniors Find Themselves with Too Much Insurance
It’s an idea reinforced from the very advent of adulthood: it’s better to have too much insurance than too little. But in the case of retirees, over-insurance is a very real possibility, and it’s a problem that can keep seniors from having sufficient resources for the costs of their golden years, expenses like medical bills, long-term care and travel.
What does it mean to have too much life insurance?
Sometimes middle-aged adults, unsure of their future needs and swayed by persuasive sales pitches, buy large policies, or several different policies, because of their fear of leaving their families with no means of support. Sometimes the amount of coverage makes sense at the time of purchase, but as the years go by circumstances change and that level of insurance is no longer needed.
Maybe your original beneficiaries no longer need the financial support they once needed in your younger years, or your family dynamics have changed. Many seniors find that they are paying prohibitive premiums, giving money they need for daily expenses to an insurance policy that isn’t actually serving them anymore. And when they are over-insured, they may come to the realization that while they still need some life insurance, they don’t need as much as they have been carrying. Even if beneficiaries might still need a payout when the policyholder dies, an overly large policy might give them more than they actually need.
Above all, seniors need to make sure that they haven’t invested in life insurance to the detriment of their own livelihoods. As one insurance blogger stated, “We all need to make provisions for our loved ones in the event of our death, but that should never be at the expense of providing for our lives. Statistically, you’re much more likely to live out your full life than to die prematurely. You will also need to provide for that!”
If you suspect you might be over-insured, schedule an appointment with a trusted financial advisor to evaluate all of your insurance holdings and their efficacy for your situation. If you have too much insurance, the next step is to investigate the possibility of a life settlement. For those who qualify, a settlement can turn a liability—excessive insurance—into a windfall of available cash for immediate retirement needs. Magna’s life settlement advisors are available to answer questions about life settlement criteria and the steps in the process.
How Selling Your Life Insurance Policy May Help Your Retirement
Planning for your retirement can be a daunting experience. There is so much to think about, especially the amount of money you need in order to retire comfortably. Generally, the rule of thumb is that the money you may need when you ultimately retire should fall somewhere between 70 to 85 percent of your income.
To estimate how much money you may need for your retirement years, you could estimate approximately how much you would be spending in the future. There are certain expenses you probably won’t have to worry about once you’re retired, including expenses related to your children. Your mortgage may be paid off, and you may not have to worry about commuting or other work-related expenses.
At the same time, there could be new expenses, such as healthcare costs. And you may also travel more after retirement since you will have free time that you didn’t have when you were working.
You should maximize your income flow during your working years so that you can be comfortable after you retire. Following are some of the key ways to increase your retirement income.
Retirement Calculator: How to figure out your retirement score:
Social Security Benefits
Avoid withdrawing money from your Social Security benefits until at least the retirement age of 65 or 67 if you were born in or after 1960. If you continue working until 70, you will receive an additional benefit of eight percent for each year you wait to retire after age 65.
If your employer offers company benefits, you can take advantage of them and choose those that can give you the maximum income after retirement. You can choose the right investments to reflect your age and risks in a 401k plan. Be wise about when you withdraw so that you can get the most benefit from the plan.
You can use your personal savings toward your retirement income, but the better option is to make deposits to mutual funds, which can give you considerably more money in the future as they grow.
Whole Life Insurance
If you have a whole life insurance policy, borrowing against the cash value and investing the balance can give you more income when you retire.
A reverse mortgage can benefit you if you are 62 or older. It lets you free equity in your home and ensures that you don’t have to make future payments.
Finally, another good way to ensure that you can retire comfortably is to avoid the trap of debt. Be smart when using credit cards and when taking out loans. Always pay the maximum toward your balance on both in a timely manner. Avoiding getting into debt can help you enjoy full control over your finances. You can also live stress-free when your finances are in good condition. As a result, you have a better opportunity to retire with a sense of security.
New Bill HR 7203 Would Allow Life Settlements to Fund Long-Term Care
A new bill being weighed by the U.S. House of Representatives would make provision for the tax-free rollover of life settlement proceeds into tax-free accounts dedicated to long-term care. The bill, H.R. 7203, was sponsored by Rep. Kenny Marchand (R-TX) and referred to the House Ways and Means Committee on November 30.
H.R. 7203, known as the Long-Term Care Account Act, would provide a significant benefit for seniors who are facing the daunting costs of long-term care. If those individuals have a life insurance policy that is no longer serving them, the bill would permit them to easily use the money from a life settlement to fund an assisted care facility, in-home care or other treatments deemed medically necessary.
The provisions of the Long-Term Care Account Act include
Tax-free transfer of funds
The tax-free transfer of funds from a life settlement into accounts used exclusively for long-term care expenses. That money can be used for long-term care insurance or any “qualified health expenses” that a medical practitioner would recommend to treat health impairments or maintain health for retirees.
– As long as the distributions from life settlements into the long-term care accounts are used for their stated purpose, they will be exempt from any tax. If funds are used for unauthorized purposes unrelated to long-term care, those expenditures will be subject to both income tax and a 20 percent excise tax.
– If the funds distributed to the accounts from life settlements are not spent on long-term care expenses, they can remain in the account untaxed until the death of the account holder and that person’s spouse.
H.R. 7203 is a win-win for seniors
The Long-Term Care Account Act is a win for seniors looking for new revenue sources, pairing the prime opportunity of a life settlement with the pronounced need of long-term care. Rising health care costs during retirement are one of the chief reasons people over 65 investigate life settlements, and the passage of this legislation would link the two in a way that will provide tangible benefits to Americans seeking to make the most of their retirement years.
Please don’t hesitate to urge your elected representatives to support this important bill. For more information about life settlements or the pending legislations, you can contact a Magna representative by scheduling a call today.
Skyrocketing Premiums Present Challenge For Universal Life Policy Holders
Older Americans today have many excellent reasons to pursue the sale of a life insurance policy in a life settlement, but one of the most prevalent reasons is the prohibitive cost of paying premiums. And for those maintaining a universal life policy, a recent Wall Street Journal article reports that some are paying double or even triple their original premiums because of an historic drop in interest rates.
According to the piece by Leslie Scism in the September 19, 2018 Wall Street Journal, many policyholders are finding that universal life hasn’t held up well over time, especially when a decade of low interest rates have depleted the tax-deferred savings account linked to the policies. The savings accounts are designed to offset the cost of renewing the insurance each year, but as interest rates have stayed down the accounts have been insufficient to stave off skyrocketing premiums.
The article cited one case study in which a 55-year-old had purchased a $1 million policy in 1988 with an annual premium of $12,000. By the time that individual turned 80 in 2013, the savings account was gone and the premium had jumped to $50,000 a year. In another case, an 85-year-old retired teacher was paying $30,000 a year for his three universal life policies—three times the premiums when the policies were issued.
One expert on the insurance industry, John Resnick, told the Wall Street Journal that many seniors “are sitting on a ticking time bomb, and they don’t even know it.” The article goes on to say, “Universal life is among the reasons Americans are approaching retirement in the worst shape in decades.”
Those who believe they are stuck paying exorbitant premiums while also trying to fund retirement costs like healthcare and housing must be educated about options like life settlements. Rather than surrender a policy, an individual faced with prohibitive premiums might be able to sell his policy for a much higher payout.
Seniors shouldn’t let prohibitively high premiums chain them to a policy that is doing them more harm than good. Depending on the health impairments of the insured and the cost structure of the original policy, a life settlement could yield a windfall considerably higher than the surrender value. When premiums become burdensome or the purpose for originally purchasing the life insurance policy no longer exists, a life settlement can turn a liability into an instant asset.
Providers like Magna stand ready to answer any questions seniors or their advocates may have about life settlements, and they can even access our simple life settlement calculator to determine their eligibility for a sale of their policy.
Designing Spaces on Lifetime Television featured Magna Life Settlements in November! During the episode, an older couple explored the process of a life settlement, the advantages of pursuing a sale of a life insurance policy and the various ways the cash from a settlement can meet the family’s needs during their retirement years. Clay Gibson, Magna’s senior vice president for origination, shared how families can benefit from life settlements.
The Joels, who were featured on the episode, are a retired couple looking to make their golden years golden. Mr. Joel started buying life insurance shortly after the couple got married, but the premiums became too expensive and he was considering either selling or surrendering the policy.
When their daughter Donna Eichner comes over to discuss the possibility, the Joels explain the possible benefits of selling a life insurance policy. Taking a life settlement would allow them to have additional funds for their retirement years. Mrs. Joel speculates on the ways they could use the extra money generated by a life settlement, including travel plans an donating to charity.
Clay Gibson explained, “Life insurance is actually property, and it’s property that can be sold. Half a million insureds are lapsing their policy every year, and that’s half a million insureds that could have come to Magna Life Settlements and received an offer above and beyond what the insurance carrier would have paid them for their policy.”
Mr. Joel enters his information into Magna’s life settlement calculator, and after viewing the results the Joels and their daughter conclude that a settlement is the wisest choice for their family. Their daughter, Donna, said, “I know myself and siblings are well taken care of, and now my parents can do what they want to do.” For the Joels, a life settlement will take an insurance policy that had become burdensome and convert it into a financial asset.
For families who, like the Joels, are seeking to make the most of their financial situation in their senior years, Magna life settlement specialists stand ready to offer information on the benefits of life settlements. Call today to consult with a Magna specialist, or visit the FAQ section of our website for more information on the particulars and process of settlements.
How A Life Settlement Can Enable A Housing Upgrade
Housing can present a good news-bad news scenario for seniors; many have been in their homes long enough to see them paid off, but limited retirement income makes it difficult for them to keep up with home repairs. A smaller budget, paired with rising costs of healthcare and other late-in-life expenses, make it tempting for seniors to defer maintenance on their house.
Retirees might cut costs by cancelling their lawn care or pest control contract or by putting off repairs that they know need to be tackled. Whether it’s a new roof, more energy efficient windows, wood replacement or plumbing issues, it is common for homeowners over 65 to postpone necessary repairs because of financial worries. The unfortunate result is a home that is deteriorating, losing value and, in some cases, creating a hazard for the seniors living in it.
Some non-profits and ministries have organized programs to provide free home maintenance for seniors, and those groups can be a godsend. But because upkeep of a house is an ongoing task, most seniors need more than occasional nonprofit help to keep an older home in good condition. In many cases, seniors are realizing that a smaller, less time-consuming house would suit their stage of life better, but they don’t have the funds to even think about a move.
A life settlement can be the answer to this housing dilemma. Like an old house, an old life insurance policy can outlive its necessity and actually become a burden. In many cases, that policy can be sold to create an extra source of income, and the cash obtained from the settlement can make a way for seniors to transition to a more favorable living situation.
The profits from a life settlement might be the boost a senior needs to move into a new home, possibly a townhome, a house in a gated neighborhood or an apartment in a retirement community. There are options for seniors that take away many of the standard maintenance concerns and allow individuals over 65 to enjoy their golden years with much less stress over house issues.
Some seniors might not want to move, but a life settlement could provide them with enough money to complete all of those repairs that they have been putting away for years. The end result could be a more efficient, pleasant and attractive version of the home they have loved for years—a place to continue making memories with family or friends. In either case, a life settlement may be the key to unlocking either a new or remodeled home. To find out if you might qualify for a settlement, use Magna’s handy life settlement calculator.
How to Convert from Term to Universal Life for the Purpose of a Life Settlement
One misperception about life settlements is the idea that only those with universal policies can benefit from a settlement. In fact, individuals with term policies that they no longer want or need might be eligible for a cash windfall if they understand how to convert their term to universal.
It’s an all-too-common scenario: A policyholder allows a term life insurance policy to lapse because he doesn’t believe it will be worth anything on the settlement market. But a term policy can have considerable potential for profit for those who understand a few key guiding principles.
First, a term policy must include a conversion rider if it is to be converted to a permanent type of insurance. Many term policies are convertible, but the riders are usually purchased at the time the policy was purchased. Insurance agents can inform their clients about the conversion potential of their policy or it can be found in the policy contract.
Another important consideration is time, because term policies only cover a limited time period, and they can only be converted before the policy lapses or the conversion rider expires. If a conversion is possible, the policyholder will still want to make sure he or she qualifies for a life settlement before pursuing the conversion.
When a term policy meets these requirements, it can be transformed from an unwanted liability to an asset that can help offset health care costs or meet other retirement needs. Those who have consulted Magna’s easy Life Settlement calculator and determined that they might be eligible for a life settlement should then investigate the conversion potential of their term insurance.
Three key reasons why a senior might pursue a life settlement for a converted term policy
Premiums are too high
Often keeping up with premium payments becomes a burden for a policyholder, especially when a term policy is bought to fill a temporary need and that need passes. A life settlement can eliminate premium payments and provide a source of income with one transaction.
The policy is about to term out.
When an individual realizes that a term policy is nearing its end, it’s a prudent time to pursue a life settlement. Every day seniors lose potential funds because they let policies lapse when they could have turned them into cash.
It is no longer needed or wanted
It is at no cost to an individual to explore the option and see if a life settlement could be worth value to help pay for continued retirement needs, health care costs or even investments.
Magna’s life settlement representatives are ready to answer questions and further explain the process to anyone who thinks that a settlement might be the right solution for their term life insurance policy. Request an appointment with us to help you request a conversion illustration from the carrier.
Selling Your Life Insurance Policy Gives You Independence
Seniors have more options than ever in their retirement years, especially if they take care of themselves and stay healthy. Aleksander Doba paddled from New Jersey to France in a solo kayak when he was 70. Sister Madonna Buder completed an Ironman Triathlon—a 2.4-mile swim, 112-mile bike and a full marathon—at the age of 82.
But even for those Americans over 65 who aren’t inclined to spend months on the open water or train for hours a day, retirement offers plenty of opportunities for independence and adventure. Some seniors try RV travel, some take to the roads on motorcycles, others take up painting or learn to play a musical instrument. The most valuable commodity for seniors is freedom—freedom to live the senior years as they choose. And one aspect of that freedom, for those seeking financial options, might be a life settlement.
The retirement years can be viewed as a season of new opportunities, and often an unwanted life insurance policy can be transformed into a source of income. It provides a double benefit for a senior—removing the burden of insurance premiums and creating a windfall that can help pay for new experiences during the golden years. Even if a senior only needs funds to pay medical expenses, a life settlement will make them feel financially empowered and eliminate an insurance policy that wasn’t serving his or her best interests.
Another appealing option of the life settlement process is the fact that seniors can pursue a settlement without the help of a financial advisor or other advocate. By starting with two simple steps—entering information into Magna’s life settlement calculator and scheduling a consultation with a Magna specialist if the calculator indicates a settlement would be beneficial—policyholders can take charge of their finances.
With fewer family and professional obligations, seniors can thrive in their retirement season when they take charge of their time, pursue new interests and keep family ties as a priority. This season of independence and risk-raking takes many forms, but one empowering move is the investigation of a life settlement. When a life settlement is a good fit, it can enhance retirement life considerably—even for those who aren’t looking to plan a solo kayak trip from one continent to another.
In this era of Uber, crowdsourcing and customized television streaming, many seniors are also opting to eliminate the middleman for certain big financial decisions. A relationship with a trusted advisor can be incredibly valuable, but consumers who are considering a life settlement might save money and time by arranging the sale of their insurance policy themselves.
If a life insurance policyholder decides to pursue a life settlement to turn that policy into income, the first step is deciding who to call first—a settlement provider or a financial advisor. The answer to that question must be considered on a case-by-case basis, but the following factors should be considered:
Understand the process
Companies like Magna Life Settlements, which has paid out nearly a half a billion dollars for life insurance policies in the past five years, seek to make the life settlement steps as simple and clear as possible, and a quick visit to the Magna website can help determine whether you qualify and how to proceed if you do. Gaining a basic education about life settlements should go a long way toward letting a consumer know whether he or she prefers direct contact with a provider or the intervention of an advisor.
Make sure advisors protect your best interests
An intermediary isn’t required to reach a life settlement, so the decision whether or not to work with an advisor is a matter of your preference. If you have worked with an advisor for years and have seen him or her represent you with integrity, you can be confident that he will leverage all of his knowledge and connections to find the optimal life settlement situation for you. Be sure to find a broker who is transparent, well-connected to find the best terms for your settlement, and licensed to practice in the state where you are located.
Understand the pros and cons of both options
Some seniors prefer the freedom to investigate the life settlement process for themselves and select the right provider, especially because they will save money if they forego an intermediary. Others are more comfortable relying on the wisdom and experience of a financial advisor as they navigate life settlements. Either option has merit and can result in a successful and profitable life settlement experience.
If Magna’s on-line calculator raises more questions or you just need to talk in more detail about the possible advantages of a life settlement, don’t hesitate to contact a Magna specialist to have your questions answered. With 14 years of experience in the industry, Magna wants to guide you as you consider the best outcome for your life insurance policy.
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