It Has Come to This -- Close-to-Death Cash-Strapped Americans Selling Their Life Insurance Policies

It Has Come to This -- Close-to-Death Cash-Strapped Americans Selling Their Life Insurance Policies
(alternet.org)

We have such an eroded public safety net that folks are reduced to selling their life insurance policies for the sake of paying their medical bills

So what's the story here? People in debt and with nothing to lose are selling their life insurance policies to investors, in order to get the cash they need to pay medical bills (or just live). In return, the investors wait for them to die, then get paid from the life insurance policy and hope to make a profit.

Like a reverse mortgage, only involving a human life.

Here’s how it works: once a person decides to sell his/her life insurance policy, the third-party investor does a bunch of research, usually based on the the seller’s medical records, to see how long the person is likely to live. (This is important, as the third party investor is on the hook to pay the sick/dying person’s life insurance premiums until their death.) Then the seller and the investor agree on a price. Say we’re talking about a $500,000 life insurance policy, and a person with a two-year life expectancy; the investor might offer $300,000, in hopes that the difference will both cover the cost of paying premiums for the rest of the seller’s life and leave room for profit.

The article is based on a NY Times piece:
Are You Worth More Dead Than Alive?
(nytimes.com)

Does the concept sound sleazy? unethical? Or a viable investment tool that helps both investors realize a profit, and financially strapped people approaching death?

To put this in perspective, take a look at a type of investment fraud called Viaticals fraud and Life Settlement fraud:
Life Settlements – Life Insurance Rescue
(quatloos.com)

Somewhere between the very bright people who claim that you can make money off your death before you die, and the very bright people who claim that you can't, lies the truth. To find that truth you must first understand the concept of a "life settlement", and to understand that, you must understand what its immediate predecessor, the "viatical settlement" are all about.

(The article is too lengthy to go into here, but it's an extremely good read.)

reply to post by Blackmarketeer



I've read about similar issues as well as the idea of being worth more dead than alive. Sadly, it's true.

It's a slippery slope to start this sort of debt/ death dealing. Soon they'll pay a bit to have you delivered sub-par care, kill you off and collect faster.

It's like the stories I've read about insurance companies getting life insurance plans on other people for a million or so, waiting for them to die, and making a profit off of their death without the family knowing.

Bad idea. If you're destined to die soon anyways...do it with dignity. Don't let people you wouldn't befriend in a million years dance on your dead body with their $5000 Italian shoes.

Slowly but surly the grip is tightening...I cashed my life insurance in last year after 20 years of paying,,nice pay off.Suing insurance company's for lost interest may be a hurdle,but at least its a fight.

I can top that. When I was born my parents took out a life insurance policy on me - the type that accrues a cash value for college or whatever one might want to use it for.

My father named himself as the beneficiary on the policy. He died in 1996 owning the IRS some back taxes and they actually seized my life insurance - annuity included.

True story.

~Heff

All I know is that my hubby FINALLY found a job, and now we are making less than we were when he was getting unemployment. Highly skilled, lots of experience. In the housing industry. lol

it gets so old.

It is definitely sleazy in my book BUT beneficial to both parties none the less.

Those selling the policies need the money. There is a company that has found a way to give them that money with a guaranteed pay off.

I myself find it distasteful. It's kind of like vultures circling a critically wounded animal... just waiting. I don't think that I could do it but it is voluntary and those who choose to sell certainly accept that.

I find it extremely sad that folks even have to make a decision like this to tell you the truth.

reply to post by Kangaruex4Ewe


It is a lot like vultures and vulture debt buyers too.

If this country really gave half a crap about 'the people' they would make that sort of thing illegal. Unsecured debt should be REALLY unsecured. Some would like to believe that everyone still controls their own destiny. That if you just WORK, you'll be ok, Not in economies like this. Maybe it hasn't happened to them yet.

I'm not really sure this makes sense. If you are close to death and have no cash, you could qualify for some type of State/Federal insurance.

Maybe they are selling them so they can enjoy their final years a little more?

This isn't as bad as "dead peasant life insurance policies" bought by employers that are the beneficiary of the policy without informing the insured employ... I can't see how this differs from a person selling an annuity except for having to die before the person making the purchase makes a profit.

The big downside in selling your life insurance to an investor is your beneficiaries (your kids) will lose out, big time (assuming you have kids). For most people, this is the inheritance they would be leaving their children.

Originally posted by Blackmarketeer
The big downside in selling your life insurance to an investor is your beneficiaries (your kids) will lose out, big time (assuming you have kids). For most people, this is the inheritance they would be leaving their children.

A downside to most, however children should not expect to receive anything from the death of their parents IMO. They gave you enough by raising you, paying your hospital bills, school, food, a roof, etc. Now if it is to help the children to pay for the burial, than that is a nice thing that some parents try to do, but should still not be entirely expected...again, only my opinion.

I would rather my parents get the care they need or some form of enjoyment before they leave this life instead of thinking of me. They earned it and I expect nothing.

Not saying you do OP...just saying none the less.

reply to post by Blackmarketeer


I'm sure the "investors" probably looked through the contract, but I can totally see an insurance company voiding the insurance policy. In order to hold life insurance on someone they must be a close relation with no conflicts of interest (unless outside of an employment contract, ie, a company takes an insurance policy out on an employee as there is a relation). Having been an agent myself I've seen that when people die the under-writers comb through all the death information to find any way out of paying the policy.. this, imo, would be a red flag.

reply to post by Rockpuck


It does seem like selling your life insurance policy for cash and naming the "investor" as your beneficiary would cause some trouble with the insurance company. That doesn't seem to be stopping a number of "life settlement" companies from coming out with ads and sales pitches, though.

reply to post by Blackmarketeer


Life insurance settlements have been going on for decades.....where have you been? It's nothing new. They are almost always a very bad deal for people but nobody ever said people were smart.

reply to post by Blackmarketeer


So is your point that the economy is so in the tank that people are cash strapped, that Obamacare was truly needed but hasn't kicked in yet, or that republicans still aren't on board with Obamanomics? Or that investors have found a new way to make money? Life insurance has typically been to help out the survivors of the deceased to pay funeral bills or just stay afloat for a while. Do we see a new bubble developing? It's a little like repackaging bad loans. Didn't we call those toxic?
Obama didn't fix the econ for sure, in fact it's worse than it has been my whole life.

Shoot, i wish i knew of someone buying them, and that could get insurance policy with no medical exam, i would do it in a heart beat.

As it stands in a couple of years all i am going to leave the wife and kids is bill's. Even if the fat cat's make a huge amount on my death, i could still get enough to pay off the house and get the wife a new car, and maybe a little to splurge and have some fun while i'm still kicking.

I had life insurance when i was working, but doc orderd me to quit work, and apply for disability which i did didnt think anything about life insurance, i wish i would have because now i am unable to get any. No hope to leave a nice nest egg for the wife and kids. I have searched the net over, no one will take you after you are diagnosed.

This is a shady way of doing things, but it sure beats leaving your loved ones broker than when you were Around, if you know odds are you are going to die anyway, might as well do what you can to help, anything is better than nothing.