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Hidden Treasure to Consider for Care

Russell Conwell, the founder of Temple University, delivered an inspirational lecture entitled “Acres of Diamonds” across the country in the early 20th century, later published as a book. The principles in this lecture still hold true today.

Acres of Diamonds

“Acres of Diamonds” focuses on finding success and wealth in life by recognizing and cultivating the opportunities available to us. This theme is developed by an introductory anecdote, credited by Conwell to an Arab guide, about a man who wanted to find diamonds so badly that he sold his property and went out in a futile search. The new owner of his home discovered that a rich diamond mine was located right there on the property. Conwell encourages readers to "dig in your own backyard!"

How many hidden treasures do we all have that we don’t realize? The Antiques Road Show demonstrates this tenet often with example after example of people who had an artifact or painting in their attic that has been sitting there unnoticed for decades, and it turns out to be worth a lot of money…for something that people thought was worthless. Who would have thought that an original Apple 1 computer would be worth $500,000?

This is not to say that everyone has a Picasso in their attic, but this does beg the question: What do we have around us that is hidden but may be more valuable than we think?

Need to Pay for Long-Term Care? Something to Consider

One of these “hidden treasures” may surprise you - your life insurance policy (yes, even a term policy). If you want and need your policy, you should keep it. But, so many people feel that they no longer need their policies, or the policies become too expensive to maintain. Importantly, families often contact the Dementia Society of America® to ask how they can best pay for long-term care when or if it becomes necessary. For that reason alone, it’s important to understand the tools available to you and consult your financial and/or legal professional before making any important decisions about whether you can and should sell a policy.

Still interested in knowing more? Here are some facts: in recent years, about 3,000 individuals sell their policies annually. Whereas 2.5 million older adults simply let lapse or surrender their policies yearly. According to the Life Insurance Settlements Association, more than $100 billion of face-value policies are lapsed by adults over the age of 65 every year. This begs the question – why? Many folks simply do not know that their life insurance policy is an asset that they own and that there is another option to sell their life insurance policy and receive cash for it.

The process of selling a life insurance policy is called, for short, a life settlement. The life settlements market has been a legal way to benefit from selling a policy for over 100 years and is highly regulated by Departments of Insurance nationwide.

Obviously, there are a million reasons why people may wish to get rid of their policies, but ultimately, the policies are unwanted, unneeded, or unaffordable. Over time, life changes, and the reason someone purchased a life insurance policy may no longer be a concern. Perhaps a spouse has passed away, the kids have moved out of the house, the house is paid off, etc. A term policy may end, or it may no longer fit into their budget. People may feel as if they have no other option but to lapse or surrender. They are unaware that an alternative may be available, including the sale of the policy.

Here's an Example

Consider this example: a 72-year-old individual with a $1,000,000 universal life policy. There is $6,000 in cash left in it. The premium to continue the policy is $2,500 per month. He did not want to afford those premiums. The options? Lowering the death benefit of the policy did not make sense to him. Surrendering the policy would bring in $6,000. Instead, his financial advisor advised considering a life insurance settlement. The result? For illustrative purposes, the person might receive as much as $150,000. Of course, each situation is different, and you should know the facts about the value of your policies before deciding to sell.

As with any asset, the funds received from selling a policy are unrestricted. Use the money for anything – save for retirement, pay for medical needs, long-term Dementia care, support your favorite non-profit organization, take a “bucket list” trip, etc.

Policies do not need to be million-dollar policies either. Face values, also known as the death benefit, of policies of around $100,000 are eligible. This “hidden asset” is already in many people’s possession, and many options are available, so speaking with your financial or insurance professional is important. As said previously, if a person wants to keep their policy, they should.

A Financial Asset That May Be Found Money

However, if someone has decided that lapsing or surrendering the policy makes the most sense for them, they may want to consider one more option – selling it. 90% of older adults surveyed said that had they known about a life insurance settlement option, they would have considered it “found money.” Your policy may be your “Acres of Diamonds,” a financial treasure hiding in plain sight.

Contributing authors' opinions are not necessarily those of the Dementia Society, Inc. We do not endorse nor guarantee products, comments, suggestions, links, or other forms of the content contained within blog posts that have been provided to us with permission, paid or otherwise. Dementia Society does not provide medical advice. Please consult your doctor.

Contributing Author: Lisa Rehburg

For more than 30 years, Lisa Rehburg has been working with insurance brokers, financial advisors, and clients in the health and life insurance industries. She has held executive roles at carriers, general agencies, and third-party administrators (TPAs). More information about Lisa and life settlements can be found here


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