Life insurance settlement nets less for seniors

Seniors who once could count on making good money from selling a life insurance settlement to investors are now said to be getting almost half as much for their trouble.

According to a recent Bloomberg News report, retirees could earn as much as $1 million by selling a $5 million policy to investors. Now, the news organization says, they can expect somewhere closer to $600,000 due to a 20 percent decline in the market for these settlements in 2008.

One reason the value of the policies is lower is that more retirees are trying to sell settlements because their savings and stock portfolios have been undermined by the bad economy. The plan reportedly works by having the investor pay the insurance premiums until the seller dies, and then the investor collects the payout.

Meanwhile, the practice has caught the eye of the New York State Insurance Department, which is calling for new regulations on the life insurance settlement business.

Commissioner Eric Dinallo's office has proposed a bill that would strengthen disclosure requirements for these transactions, along with a complete description of all offers and counter-offers relating to the sale of the policies.

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