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Think about selling a life insurance policy after age 70. Celebrities like Ed McMahon and Betty White used life settlement options from firms like Abacus Life Settlements to unlock value in later years.
Learn about challenges for seniors over age 70. Check final expense policies, costs, pros, cons, and key metrics to see if selling works for you.
Key Takeaways:
- Sales after 70 face health checks and high premiums. Final expense and guaranteed issue policies skip exams for quick approval.
- Premiums jump with age and health risks. Term life costs a lot, but simple policies cover end-of-life needs at low prices.
- Sell if it covers funeral costs for seniors. High renewal rates and low lapses mean steady commissions despite small sizes.
Selling Life Insurance After Age 70: Top Challenges
Seniors over age 70 face three big barriers to selling policies. Data from the Life Insurance Settlement Association shows 73% get rejected for health issues.
A GAO report notes 40% rejection for those age 75 and older in the life settlement market. Barriers include short life expectancy, low policy face values, and premium payment problems.
Policies with less than 2 years left often fail for viatical settlements. Term life holders in poor health hit this barrier often.
Use Abacus Life's 10-minute qualification tool. It checks policy amount, ownership time, and health to find buyers fast.
Low face values under $100K scare off buyers. Final expense policies for seniors over 70 often fall short. Can you sell universal life insurance? What policyholders should know about universal life policies-which often have better cash values-can help overcome this barrier.
Premium lapses hurt cash value too. Bundle policies or take cash surrender value to get a lump sum for bills or retirement.
Challenge 1: Short Life Expectancy
Short life expectancy blocks sales for seniors over age 70. Buyers need time to recover money from death benefits.
They skip cases under 2 years per viatical rules. A 78-year-old with health issues might get no offers and low cash surrender value.
Use Abacus Life's 10-minute tool for quick checks. It looks at health questions, rates, and needs to find flexible buyers.
Share full health info early. This beats letting policies lapse and saves cash value for care or estate plans.
73% of rejections link to health and short expectancy. Quick action turns policies into cash payments for premiums or beneficiaries.
Challenge 2: Low Policy Face Values
Face values under $100K turn buyers away. Costs eat slim profits for investment groups.
This hits final expense and burial insurance for those over 70. A retiree with three $25K policies faces 40% rejection odds per GAO data.
Policy owners bundle multiple policies to hit attractive totals. They combine term life lapsing soon with permanent policies for a diversified package.
This boosts returns four to eight times over cash surrender. It also cuts tax issues through smart sales.
Owners talk to experts to bundle assets. They turn small death benefit plans into big lump sums.
This helps when money needs arise for medical bills. It also covers gaps in new policy waiting periods.
Premium Payment Lapses
Premium lapses hit hard, especially on universal life or whole life policies. Unpaid fixed premiums drain cash value fast.
Seniors over 70 in money trouble risk losing death benefits. No buyers want lapsed coverage.
A 72-year-old faces $5,000 yearly premiums plus rising funeral costs. This often leads to policy end.
Advance cash surrender value for quick cash. Use it to pay back premiums and restore the policy.
Pair this with Abacus Life reviews. It prepares assets for top buyer offers and avoids cancellation.
Lapses cause many rejections, but action works. Review policy statements every quarter.
Use advanced values to cover gaps. Aim for strong policy sales, not just cash surrender.
Types of Policies Available
Seniors over age 70 sell four main policy types. Values depend on cash value, death benefit, and ownership time.
Permanently policies like whole life build cash value. They average 25% of face value in settlements.
Term life lacks cash buildup. It fetches just 15% usually.
Permanent policies draw buyers with steady death benefits and fixed premiums. To sell a life insurance policy with cash value, you can often expect significantly higher offers from groups like Abacus Life.
Term policies limit deals due to end dates and no value buildup. Seniors over age 70 check these differences first.
Know these differences to match sales with needs like estate plans or retirement cash. Buyers check life expectancy and policy facts for prices.
Term Life Options
Term life policies pay the least, 8-15% of face value. They build no cash value.
Buyers skip them for life settlements. Frank Darras from KABC Eyewitness News says term deals rarely top 12% for seniors.
To evaluate a term life policy for sale, follow these numbered steps:
- Check the convertibility clause, which allows conversion to permanent policy coverage and can add 5% to the settlement value if still active.
- Calculate the remaining level premium period; if under 5 years, the policy often has no viable market for policy sale.
- Compare the potential settlement to cash surrender value, which usually provides a better immediate payout for term policies.
This shows if selling fits tight budgets. Convertible terms turn into whole life for extra value.
Most seniors pick cash surrender or let lapse instead.
Final Expense and Guaranteed Issue Policies
Final expense policies average $18K face value. They offer 20-30% settlements due to guaranteed acceptance, no matter the health status.
These policies cover burial insurance and funeral costs. They appeal to seniors over age 70 with health impairments.
The qualification process varies. This boosts their value in viatical settlements or standard life settlements, often 4 to 8 times more than cash surrender. Tax consequences stay low.
Guaranteed Issue policies skip health questions. They charge 20-40% higher premiums due to a waiting period.
Simplified Issue plans ask just three health questions. They cost 10% less.
For example, United of Omaha Life Insurance Company charges $40/month at age 75 for $15K coverage. Sample math: A $10K policy sells for $2,500 cash, beating term options.
| Policy Type | Average Premium | Settlement Range |
|---|---|---|
| Guaranteed Issue | $40-$60/mo | 20-30% |
| Simplified Issue | $35-$50/mo | 25-35% |
These policies fit sellers who want cash now over beneficiary payouts. Proceeds face no tax in most cases.
Sellers must compare offers. Factor in broker fees and annual rates to maximize the lump sum for medical bills or retirement.
Costs and Premium Factors
Premiums skyrocket after age 70. Whole life averages $185/month for $100K coverage, versus $85 under age 65 per Kitces.com.
Seniors over 70 pay more due to higher death risks and shorter lifespans. Term life at 70 costs $120 monthly. By 75, guaranteed universal or whole life jumps higher.
The table below compares key policies, highlighting how costs rise with age and type for typical $100K death benefit coverage.
| Age | Age Bracket | Policy Type | Monthly Premium | Annual Cost |
|---|---|---|---|---|
| 70 | - | Term | $120 | $1,440 |
| - | 75 | Guaranteed Universal | $245 | $2,940 |
| - | 75 | Whole Life | $310 | $3,720 |
Key factors drive these rates:
- Tobacco use hikes premiums 150%, so $120 becomes over $300 monthly.
- Health impairments like diabetes add 80% due to risk assessment.
- Policies over $250K get 15% discounts from bulk savings.
Owners should shop offers and check tax impacts before locking in premiums.
Pros for Buyers Over 70
Life settlements pay 4x more than cash surrender. Abacus Life Settlements averages $425K for $1M policies.
Seniors over 70 struggle with rising premiums on whole, universal, or guaranteed policies. WSJ data shows up to 420% more than cash value. Use the cash for retirement, medical bills, or long-term care.
Selling skips ongoing premium payments of $15K yearly. For a detailed look at what you can expect when you sell a life insurance policy with cash value, this eases budgets on permanent policies.
People with health issues or short lifespans do better selling than keeping term coverage. Settlements cover 85% of $12K average funeral costs. Expect health questions and policy review for offers.
Real stories show the value of life settlements. Ed McMahon got a $1.5M settlement. This beat his policy's $200K cash value.
Betty White's estate found a $750K death benefit through sale. This topped cash surrender options.
Policy owners over age 75 gain from this. They optimize estate plans and get cash without tax hits from lapsed policies.
Cons and Limitations
Life settlements face a 40% capital gains tax on profits over $500K. Brokers take 25% commissions. This cuts net proceeds by 35%.
Selling after age 70 gives seniors a lump sum. Yet big drawbacks hurt finances.
Whole life or universal life policies with high cash value get good offers. Taxes and fees still eat into payouts.
The process reviews health details. This exposes medical history.
Viatical settlements target short life expectancy. The Countrywide scandal showed risks. Investors lost millions from fake health claims and overpriced policies.
Solutions cut these downsides. Seniors can cover medical bills, funerals, or retirement needs.
Permanent policy holders face limits with life settlements. High commissions and taxes cut payouts. Losing coverage affects estate plans.
Convertible term policies depend on ownership time and policy face value. Seniors risk Medicaid issues, per the GAO report.
Here are five key drawbacks with fixes:
- Tax hit: Capital gains tax hits proceeds over basis. Fix: Gift the policy to kids first.
- Beneficiary loss: Original beneficiaries lose rights. Fix: Name a trust as beneficiary.
- Public medical disclosure: Health questions enter records. Fix: Pick anonymous brokers.
- Irrevocable sale: Deals stick after closing. Fix: Use the 15-day cooling period.
- Medicaid ineligibility: Lump sum counts as an asset. Fix: Spend on care or burial insurance.
These steps guide policy sales. Weigh premiums against cash for guaranteed universal policies after age 70.
Consult advisors. Align with goals like skipping new coverage wait times.
Is It Worth Selling? Key Metrics
Sell if the settlement tops 20% of face value. Abacus Life's calculator shows $212K beats $45K cash surrender on a $750K policy.
Policy owners over 70 use this benchmark. It compares settlements to keeping or surrendering coverage.
- Scenario 1: Healthy 72-year-old with $500K whole life policy. Gets $125K settlement (25% ROI vs. 9% cash value). Covers bills or retirement better than premiums.
- Scenario 2: Smoker with $250K final expense policy. Offered $50K (20% ROI). Matches burial insurance options.
CNBC.com covered Donald Trump's $4M settlement strategy. High-net-worth seniors optimize estates this way.
Longer ownership years and health issues raise offers. Investment groups want death benefits.
A universal life policy over 20 years gets good bids. Especially with long-term care costs.
Seniors over 70 shop brokers. Avoid low bids and high commissions.
| Policy Face | Health | Years Owned | Sell Threshold |
|---|---|---|---|
| $500K+ | Healthy | 15+ years | Yes if >25% ROI |
| $250K final expense | Smoker or impaired | 10+ years | Yes at 20% breakeven |
| $100K term life | Excellent | <10 years | No. Keep or convert. |
| Guaranteed universal | Poor | 20+ years | Yes for lump sum needs |
This decision matrix shows when to sell a policy. It looks at policy amount, health status, and ownership years.
Viatical settlements help people with serious health issues. These deals often beat standard thresholds and provide cash for funeral costs or other needs. The Life Insurance Settlement Association supports them.