Chicago, IL. The life settlement market is growing. In the US, around 60 million households have a life insurance policy, an estimated $20 trillion worth of life insurance policies. Of these 60 million households, less than 10% will result in a death benefit payout from the insurance companies. In fact, most policies will simply lapse resulting in over $120 billion in face amount of policies held by seniors to simply lapse, every single year.
The “secondary market” provides policyholders with financial options that are not made available to them by the life insurance companies. Without the life settlement option, policyholders who have paid into a policy for decades are faced with either cancelling their policy or accepting the much smaller ‘surrender’ value of the policy. Life settlements allow policyholders to sell their policy for a significantly higher price, especially when compared to lapsing a policy.
Another reason that life settlements are considered ethically sound is due to its highly regulated status. The State Insurance Commissioners currently regulate life settlements in 45 states, an estimated 90% of the total US population are all covered by regulations and protections.
Today’s regulators, in support of policyholders selling their policies on the secondary market, have standardized contract terms and protections for all parties to the transaction, protecting both the sellers of policies, as well as the buyers. Such regulations have resulted in increased consumer confidence as well as increased investor confidence, all contributing to the overall growth of the life settlement market with new buyers and sellers entering the market daily.
Regulatory protection for consumers and investors is not the only sign of an ethical marketplace. Many market participants feel the state’s minimum requirements can be expanded, producing campaigns that preach transparency and good faith. Organizations like LISA(Life Insurance Settlement Association) advance the highest standards of practice and professional development for the industry by educating consumers and advisors about life settlements as an alternative to lapsing or surrendering a life insurance policy. LISA’s vision is to “promote the development, integrity and reputation of the life settlement industry and advocate for a competitive marketplace.”
Since 1994, LISA has been a leading voice in promoting responsible legislation and regulation of the life settlement industry. Members and staff have contributed conceptual as well as detailed language to laws governing the industry in every regulated state. These efforts have resulted in improved public information and awareness while helping to create a competitive marketplace that delivers a valuable financial service to both policyholders and buyers of policies.
A good indication that a life settlement broker is registered and authorized is to check with LISA. Consumers are advised to only work with brokers that are also members of LISA.