There is a mounting momentum to expand awareness among seniors (65+) that there might be some hidden cash lying tucked away in a drawer. This comes in the form of a ‘life settlement’, or cashing in a life insurance policy.

      This option can sound attractive in these difficult times. Several states have even passed legislation to educate policy holders about the possible benefits of turning a life insurance policy into cash and instituting mechanisms to make this process clearer and simpler.

      Many policies never pay death benefits because the premiums have lapsed for an array of reasons. Sometimes the policy holder simply decides he or she no longer needs the insurance so you stop paying the premium. You may recognize that the policy, if a Term policy, is coming to the end of its term and you do not want to pay the huge increase in premiums that are required to keep the policy in force.             This matter is one that must be very carefully considered and discussed fully with your family, tax advisor, estate attorney, financial planner, and anyone else involved in your money matters. Family members who are named beneficiaries on the policy could be disturbed and distressed because they no longer can expect a financial windfall when you die.

      In simple terms, you sell your policy to a third party, usually facilitated by an insurance agent, for much more than the cash surrender value but much less than what the benefit would be paid if you passed away. You get a cash value payment for the policy and surrender any rights to payments from that policy since the third party then cashes in when you die.

      A Life Settlement might be a good thing to do if your policy will very soon expire and or you would just stop making payments because you do not need the policy anymore. At least you are then recovering some of the premium that you paid over the years. And if it is a Term policy, it has no cash value with the current insurance company.

      You also have the option of having the beneficiaries pay for the premium since they would benefit from your death. No matter what you decide, be sure to research your options and get professional advice. Do not enter into this decision rapidly.

While these are difficult times and this may be tempting, be sure that you really do not need this policy or that you feel justified and comfortable that it is being removed from your estate.

Wayne R. Dean is a licensed insurance agent with LifeTrust Financial Company in Summerville SC and available by phone at 843.693.9925.