Alert
Close

Introducing AARP RealPad: The Wi-Fi Tablet That Makes It Easy to Share, Learn, Connect and Play. Learn more

Most
Popular

Viewed

Nothing has been viewed

Selling Your Life Insurance? Proceed With Caution

Life settlements may sound appealing, but there are several potential drawbacks.

People who are terminally ill have another avenue for getting needed cash. Most life insurance policies—term and cash value—now include a rider called "accelerated death benefits." This option allows you to tap into your death benefit early and use the money tax-free. Ultimately, the death benefit is reduced by the amount borrowed, plus some additional fees.

You can request accelerated death benefits by contacting your insurance company. Typically, the company will ask you to provide documentation of your health condition. Exact requirements vary, but generally you must have a life expectancy of less than two years.

When evaluating options, Bennett recommends involving adult children in the discussion. "A son or daughter may offer to help with expenses in order to keep a life-insurance policy in force, thereby preserving the value of the policy," he says. "Often, that makes the most sense for everyone financially, since the life insurance money may ultimately be needed for future parental expenses or estate-planning purposes."

Do Your Homework

If you do decide to proceed with a life settlement, do thorough research. "Call your state insurance department, and make sure everyone you're dealing with is licensed," says Thomas R. Sullivan, commissioner for the state of Connecticut Insurance Department. "Find out whether there have been any consumer complaints."

It's also important for you to understand the rules governing life settlements in your state. Many states have adopted model standards from the National Association of Insurance Commissioners or the National Conference of Insurance Legislators. Policy owners sometimes have the option of returning their life settlement and reinstating their life-insurance policy within 30 to 60 days.

Sullivan also urges you to consult with a financial or tax adviser: "Life settlements are a big decision," he says. "You need to understand all the implications for you and your heirs before moving forward."

 

For more information about planning for long-term care, visit www.aarp.org/decide. Decide to plan now for long-term care, create a plan that works for you, and share it with your loved ones. Let AARP help you Decide. Create. Share.SM

 

Topic Alerts

You can get weekly email alerts on the topics below. Just click “Follow.”

Manage Alerts

Processing

Please wait...

progress bar, please wait

Tell Us WhatYou Think

Please leave your comment below.

Caregiving
Resource Center

Find tools, work sheets and tips on how to plan, prepare and succeed as a caregiver. Select a Caregiving Resource Center topic from the drop-down menu below.

Discounts & Benefits

From companies that meet the high standards of service and quality set by AARP.

Prescription medication spilling out of bottle

Members get a free Rx discount card from AARP® Prescription Discounts provided by Catamaran.

Grandson (8-9) whispering to grandfather, close-up

Members save 20% on digital hearing aids with AARP® Hearing Care Program from HearUSA.

AARP membership discount Man trying on eyeglasses at optometrists smiling

Members save up to 60% on eye exams at LensCrafters.

Caregiving walking

Caregiving can be a lonely journey, but AARP offers resources that can help.