Life Settlement Industry Fear Mongering

It seems as though people don't like change and bring fear when presented with new ways of doing things. Life settlements in their modern form are relatively new. However, they have been around long enough to garner a reputation as a consumer friendly transaction and one that has a legitimate place in the marketplace.

Although, many uninformed people equate life settlements with some sort of rip off or fly by night deal. An Aug 12, 2009 article by Robert Powell in goes a long way to fueling this fire. In the article entitled "Let's make a deal -- on your life-insurance policy: Life settlements' cash payout may be appealing, but buyer beware" Mr. Powell tries to paint a life settlement as a bad deal for consumers. His article neglects to point out a very important key points.

1) Life insurance settlements have been protected over and over again because they are viewed as a very consumer friendly transaction. For example, Maine has a law on the books that requires life insurers to inform policy owners that life settlements are available, when the policy seller expresses interest in surrendering their policy. Why does Maine do this? Because a life settlement may and probably will net the consumer more money.

2) Mr. Powell points out that many states are regulating life settlements and uses this fact to suggest something is awry with the industry. Well regulation is an integral part of business in the USA. Life settlements while not regulated in all states now joins auto repair facilities, banking, medicine, bail bonds, attorneys, insurance sales, real estate and many other state regulated industries. Regulation and licensing does not mean an industry has problems. It means a state recognizes its place in society and is establishing guidelines for the practice of that industry in a state. In fact, much of the state legislation includes life settlement protection as mentioned in #1.

3) Mr. Powell also refers to a FINRA memorandum many times in his article. The interesting point there is FINRA has no jurisdiction over life settlements except for life settlements involving variable policies. Those are policies that have a stock investment aspect that are originally sold by broker/dealers (stock brokers). In fact, the memo he tries to remind people that variable policies are a special carve out and fall under their jurisdiction. FINRA does not say life settlements are bad or they don't have place in the market.

4) Mr. Powell goes onto suggest that life settlements are scamming seniors out of their money. Hardly. Life settlements are available for those that want them. If a senior doesn't want to sell their policy in a life settlement that is their prerogative. If they have an unwanted or unneeded life insurance policy they are free to let it lapse or surrender it to the insurance company. It would be foolish to do so without knowing all of the options available, but it is certainly their right. At the end of the day, life settlements are an option. They are not the perfect option in every situation, but they are good option for some. State regulators, financial planners, consumer advocates and seniors will agree that the best thing for a senior to have is options. Know all of their options and then have the freedom to choose what is best for them. People such as Mr. Powell forget life insurance is an asset and people have a right do what they want with their property and assets.

At the end of day, I question why people want to take away someone's right to sell their own property or do what they want with an asset. People such as Mr. Powell should take the time to talk with people who have sold their life insurance policies in a life settlement. Find out why they did it and what process they went through to decide on a life settlement. This would provide valuable insight to the benefits of life settlements and why for some people it is the best choice they can make. Then ask yourself, should we restrict the choices and limit the options for these people?

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