by KYW's Salil Gutt
Seniors are seeing a source of cash drying up. The credit crunch has all but stopped the life settlements industry. With life settlements, seniors sell their insurance policies to investors for a lump sum payment. This had been a booming business until last year when sales hit $12.2 billion according to the Wall Street Journal. Now sales have slammed into a wall.
In flush times it was not unusual for a seller to receive up to 30% of the face value of the policy in a buyout. No longer. Some deals are getting done but at vastly lower prices than sellers expected. Desperate sellers are grabbing the lower offers as they seek to shore up their finances as their nest eggs have been decimated.
It may be wiser to defer selling your policy for a couple of years until the credit starts to flow again. In the meantime, you can borrow against the cash value of your policy to tide you over. If there is no cash value you may have no choice but to look for any offer as the policy will lapse much to the delight of your insurance company.
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