Cash from selling unwanted life insurance can help seniors fund safer alternatives to congregate care facilities


With more than 40 percent of pandemic deaths attributed to nursing homes and assisted living facilities, the COVID-19 pandemic is reshaping the models of care for the elderly.

Many families are exploring safer alternatives, such as hiring in-home caregivers for their parents or undergoing extensive home renovations that enable handicapped parents to age-in-place.

While some families are financially well-positioned to make the change to in-home care for mom and dad, the added costs associated with these alternatives can be out of range for many.

For seniors over the age of 65 who meet the qualification criteria, selling an unwanted life insurance policy (known as a life settlement) may provide immediate cash to help pay for in-home caregivers, or for home accessibility modifications.

The first step in getting started is for families or their professional advisors to evaluate the continued need for mom or dad’s life insurance policy. In some cases, selling an unwanted policy and using the cash proceeds for in-home care may be the wisest option. 

The need for home health care for seniors will increase

The recent pandemic has helped underscore the need for quality home health care.  As of July 15, 2020, at least 57,000 residents and workers had died from the coronavirus at nursing homes and other long-term care facilities, according to the New York Times. And 10,000 baby boomers a day turning 65 between now and 2030, the need for home health care will only increase.

Due to the lethality of the coronavirus as well as the isolation patients face while in assisted living facilities and nursing homes, many families are taking matters into their own hands and exploring other options.

Some families are temporarily bringing mom or dad home until the COVID-19 situation improves. Others who had been considering moving their parents into a long-term care facility are rethinking their decision and opting instead to undergo home modifications for handicap accessibility. Still other families whose elderly parents require end-of-life care are opening their homes to provide a place for mom or dad to spend their remaining days among loved ones.

But the reality is that these in-home care solutions can be costly because they often involve paid caregivers or private nurses. Some families may be required to withdraw funds from their own retirement savings to pay for mom’s care. Other families may incur loans or take out second mortgages. Or, as in this actual case example, the husband used the proceeds from selling a converted a term policy to help pay for his wife’s in-home Alzheimer’s care.

What is a life settlement and why is it a smart financial option?

A life settlement is the sale of a life insurance policy to an institutional investor for a value far in excess of the policy’s cash surrender value, but less than its death benefit. When faced with letting a policy lapse or surrendering it for a small cash payment, many seniors are opting to sell their policies because it simply makes economic sense.

Prior to the existence of the secondary market for life insurance, policy owners received very little economic value for policies they no longer wanted. Now, they have the option to receive on average four to six times the policy’s cash surrender value.
Unfortunately, many seniors are still unaware the life settlement option exists. According to the Life Insurance Settlement Association, it is estimated that more than 90% of life insurance policies lapse due to consumer’s lack of awareness of the life settlement market.

Life Settlement qualification criteria

Buyers of policies in the secondary market for life insurance are typically looking for policies insuring people who are age 65 years or older. However, without significant medical impairments, seniors who sell policies are more likely to be age 75 and older, with an estimated life expectancy of 15 years or less. The size of the policy may range on the low end from $100,000 to $250,000, to multi-million dollar policies as large as $20 million or higher. The average life settlement transaction involves policies with a death benefit of $1-$3 million on seniors 78 years or older.

Common reasons that seniors sell their policies

The most common reason that seniors sell their policies involves the need to pay for medical expenses or fund long-term care.

Other reasons that seniors are motivated to sell their policies involve lifestyle changes, such as the following:

  1. The insured’s estate planning goals have changed and coverage is no longer necessary
  2. Pay off debt or help family members become financially stable
  3. Life insurance that was required for business purposes is no longer needed
  4. Expensive premiums are impeding the ability to take care of basic living needs
  5. Children are grown, priorities have changed, and they want to travel or enjoy retirement
  6. There is a need for reduced coverage by selling a portion of the death benefit

  • Selling your policy requires using a Life Settlement Broker

  • When conducted in accordance with industry best practices, selling a policy involves a life settlement broker, such as Asset Life Settlements. As licensed brokers authorized to do business in 48 states, we have a fiduciary duty to represent the policy seller’s best interests by negotiating the highest possible settlement offer. We do that by creating a bidding competition among multiple institutional money sources until the highest offer is received.

Next steps

Selling a life insurance policy will typically take 60-90 days. If you want to learn more about life settlements, or if you have questions about whether you (or your client) qualify(ies) for a life settlement, contact us at 1-855-768-9085 for a free no-obligation pricing analysis.