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Retirement: Life Insurance Options

An Article by Karl Fitzner

Seniors should look again at their reasons for keeping life insurance. Life changes. Sometimes the reasons used to purchase the insurance no longer apply. If so, what are the options? And who should you talk to about it?

Reasons to reconsider keeping your life insurance:

  • Was the policy bought to provide for children who have grown up and are taking care of themselves now?
  • Was the policy bought to maximize a pension or annuity payout?
  • Is it left over from a business enterprise such as a key man or business continuation plan?
  • Is the insured or the beneficiary of the policy chronically or terminally ill?
  • Is the policy a part of a group or payroll deduction plan you do not wish to continue when you retire?
  • Is it no longer possible to pay the premiums?
Your Options
Options range from letting the policy lapse and lose all benefits to selling to an investor as a life settlement. There are several possibilities between those two extremes. Which one you finally decide on will depend on your personal circumstances.

The first choice considered is to continue as you have been. Pay the premiums. Let the cash values build up if it is not a term policy. You might have need of it later. If you decide to use it as a life settlement it will probably be worth more the longer you wait.

If the original purpose of the policy is no longer valid you could use it for another purpose. Change the beneficiary to a charity. Endow an education fund for the grandchildren. It is your policy. You may designate the proceeds to anyone you wish.

If you no longer wish to pay the premiums but still need some or all of the insurance, there are paid up options available with whole life or universal life insurance. The cash value can be used to purchase a term policy or a paid up permanent policy with a smaller death benefit.

Life Settlements are available to seniors age sixty-five and older. If you no longer need the insurance or do not wish to continue paying premiums you can sell the policy to an investment company for fifty to seventy-five percent of the face value. This option brings several times more than redeeming the policy for its cash value. The older you are the better the offers are. A word to the wise, obtain offers from several companies. They may differ by many thousands of dollars.

Who Should You talk To?

I would recommend a Certified Financial Planer, CPA, attorney, or other fee based financial professional. Many insurance companies discourage life settlements. They would prefer the policy lapse or that you simply use one of the options, which are less expensive for them. Their agents are encouraged to steer you away from life settlements. The life settlement brokers and some life insurance agents who have been recruited by a settlement provider will steer you away from the other options even if they are in your best interest. Those other options will not pay them a commission. A fee-based financial professional will probably be your best choice.

© 2009 Karl Fitzner. Used by permission
Karl Fitzner is a former insurance agent who specialized in life and group health insurance. His web site,, provides information on life settlements, viaticals and related topics for consumers and professionals. Neither Mr. Fitzner nor engages in the purchase or sale of settlement contracts.

We are not certified financial planners or advisors. The information in this website is general information only. Always consult a licensed financial planner before making any finance or investment decision.

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