How life insurance settlements could bring liquidity, tax savings

Core Insights - Life insurance settlements present an opportunity for clients to donate to charities while benefiting from current tax laws before potential changes occur in 2026 [1][5] - Selling life insurance policies on the secondary market allows policy owners to receive a lump sum, especially if their insurance needs change [2][3] - The average life settlement sale last year yielded 6.5 times the cash surrender value of the policies, indicating strong institutional demand [5][6] Industry Trends - The life insurance settlement market has seen sellers receive over $2.5 billion more than potential payouts from lapses or surrenders over the past four years [6] - Despite the significant financial benefits, only a small fraction of the 11 million life insurance policies in the U.S. are involved in settlements, with 2,699 transactions reported [6] - The total proceeds from these transactions exceeded $600 million, highlighting the market's potential [6] Considerations for Policyholders - Policyholders are advised to consult licensed advisors to ensure their interests are prioritized, rather than dealing directly with buyers [4] - Factors to consider include ongoing insurance needs, alternative liquidity options, tax implications of lump sum payments, potential impacts on family members, and privacy concerns regarding health information [7]