The content below was provided by Magna Life Settlements.

It’s an increasingly common story: a universal life insurance policy owner finds himself paying premiums for a policy that he no longer needs or wants. He might have had insurance in place to financially protect loved ones in case of an untimely death. But now, in his golden years, most debts are paid off and the need for life insurance has disappeared. That policy, which was a safety net for years prior, suddenly has the dead weight of a liability. After years of paying premiums, the policy owner feels committed to keep unneeded life insurance active, yet premiums are only getting more expensive every year.

Policy owners find themselves in a catch-22: if they fold and quit paying premiums, their policy will lapse, and they forfeit the jackpot. But if they continue paying premiums, their cash flow will suffer, their standard of living could decline, and their retirement years may be strained with continual financial concern—all in an effort to keep an unwanted or unneeded policy in force. To add insult to injury, even if baby boomers do come up with enough money to finance premiums, they still have to die to qualify for the death benefit.

At the heart of this expensive and disheartening scenario is something called “cost of insurance,” or COI. This cost represents what it takes for carriers to insure policy owners, but it doesn’t always match what policy owners pay carriers in premiums. Specifically, policy owners generally pay more in premiums than it costs to insure them in the early years of a policy (see chart below). Some of the excess premiums are accrued to the policy's cash surrender value and can offset the rising cost of insurance as the insured gets older. Carriers raise COI in order to mitigate the risk of paying out a death benefit to insureds.

Life insurance has been refined over centuries and structured to maximize profit for the carrier. Part of that equation is minimizing the risk of future costs, and carriers do this by making you pay more as you get older. When a life insurance policy already feels like a liability, this structure of payments only intensifies financial pressure. The unfortunate fact is that many policy owners continue paying premiums for as long as they can, and finally, when they have no more money to spare and are forced to live frugally, they surrender their policy at a discounted price. The number one rule in gambling is that the house always wins. And in this case, the life insurance carrier is the house.

The Solution

What if you could fold yet reclaim a significant portion of your bets? What if you could stop premium payments, receive a windfall and enjoy these benefits while you’re alive? A life settlement can provide this living benefit for baby boomers; it can turn your life insurance back into an asset. Through life settlements, the burden of a liability can be transformed into cash now to be used for anything. Owners of eligible policies will receive market value—a value which exceeds the cash surrender value—and escape the relentless pressure of premium payments.

Never before has this option been more favorable. Recent 2018 changes in tax law raised the threshold for taxable transference of wealth at death and granted more tax deductions. In fact, the thresholds have more than doubled and currently reside at $11.2 million for individuals and $22.4 million for couples, so the tax shelter which life insurance provided for estate planning is no longer needed in most cases. In addition, your policy tax basis has increased, resulting in less taxes taken from your potential settlement cash.  

If your policy feels more like a liability than an asset, contact Magna Life Settlements to explore a settlement and enjoy your policy’s real value. Instead of struggling during retirement years to make premium payments for an elusive death benefit, baby boomers have the chance to sell their policy now, beat the house, and claim the jackpot.

About Magna Life Settlements

This article was contributed by Magna Life Settlements, the top-ranked life settlement provider by payout to seniors. Active in the life settlement industry since 2004, Magna is licensed to do business in every state. To learn more about how Magna can convert an unwanted life insurance policy into cash, visit www.magnalifesettlements.com. 

Image: iStock, provided by Magna Life Settlements