Table of Contents:
- Myth: Life Settlements Are Only for the Terminally Ill
- Myth: Seniors Put Themselves at Risk by Purchasing Life Insurance
- Myth: Only Very Large Policies Qualify
- Myth: Policyholders Have to Sell Their Entire Policy
For years, life settlements flew under the radar as unknown and untapped sources of financial support available to seniors no longer in need of their term, whole or universal life insurance policy. Because so few people knew—and still don’t know—the facts about life settlements and how they work, several falsehoods and myths have proliferated over time. While policyholders and insurance professionals alike have a good deal yet to learn about the life settlement industry, new resources are becoming available to educate the public about their options.
Myth: Life Settlements Are Only for the Terminally Ill
Although life settlements are not, in fact, restricted to terminally ill policyholders, it’s easy to see how this myth got started: Back in the 1980s, the life settlement market was established on viaticals. By definition, viatical settlements were created as a means for terminally or chronically ill seniors to recoup money they were putting toward monthly life insurance premiums. More often than not, these savings were used to address mounting medical bills.
It is true that your health status plays a key role in determining whether or not you qualify for a life settlement, as well as how much you stand to gain from selling your policy, but you do not need to be seriously ill in order to benefit from a life settlement.
Myth: Seniors Put Themselves at Risk by Purchasing Life Insurance
For a long time, many believed they would be putting their lives at risk by purchasing or selling a life insurance plan. It’s been rumored that for some people—typically the very wealthy—buying a policy is risky because beneficiaries with malicious intentions might plot against the policyholder in order to reap their death benefit. Similarly, in the early days of the life settlement industry, it was thought that bad actors could hire a “hitman” to target seniors pursuing a life settlement. Though these myths are technically plausible, they are extremely unlikely to occur. The life insurance and life settlement industries are supervised and secure, with measures in place to prevent those with ill intentions from acting fraudulently, or even violently.
Myth: Only Very Large Policies Qualify
The idea that only extremely expensive policies will qualify is false—even fairly modest policies can get decent bids on the secondary market. Seniors do not necessarily need to possess exceedingly large or high-value plans to benefit from a life settlement.
Myth: Policyholders Have to Sell Their Entire Policy
It is, in fact, possible to sell only a portion of your life insurance policy rather than the whole thing. Parting with just a portion of your life policy is, for some, the best of both worlds, as you will remain covered but pay less in premiums each month or year.
Thanks to increased awareness, seniors are able to use the life settlement market to their advantage. If you are 65 or older and own a life insurance policy with a face value of at least $100,000, you may qualify for a life-changing life settlement.