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Elderlaw: 03/15/2007

Other Options to Cashing in Life Insurance

Dear Len & Rosie,

My mother is 72 years old and has an old $1,000,000 life insurance policy. She no longer has a need for this policy and she can’t afford the premium payments anyway. She has enough problems paying for her care at home, and her life savings is rapidly depleting. Her insurance company has offered her very little if she were to cash in her policy. Does she have any other options?


Dear Joseph,

There are always options. One of them would be for you and your siblings to pay the premiums. If you’re going to get the money after your mother’s death, then this may be a good idea. But if that’s not feasible, then having your mother drop her policy or cash it in is probably the worst thing to do.

Before Life Settlement companies came into being, life insurance companies had a complete monopoly power over their policies. Consumer choices were limited to cashing in policies for much less than what they’d pay out on death, dropping them altogether, or paying and paying and paying.

Today this is not so. Your mother’s life insurance should be considered as a valuable asset that can be sold if necessary. There may be enough money in your mother’s policy to keep her from having to sell her home and move into assisted living or even a nursing home.

She should review her policy, because she now has options that were not available in the past. She can do what’s called a “Life Settlement” in which she can sell her insurance policy on the open market to investors willing to buy existing life insurance. Ironically many of these investors are insurance companies themselves. The amount of money they’ll offer your mother will be based on her life expectancy as determined by the same sort of actuarial life tables that insurance companies used to sell her the life insurance to begin with.

The older your mother is, her life expectancy will be less, and investors will be willing to pay more for her policy. The good news is that your mother has a good chance of selling her policy for two to three times what her life insurance company will pay her if she simply cashes it in. If she sells her policy, the investors will own it and they’ll pay the policy premiums. Your mother can use the money to help her spend her remaining days at home.

There are many reputable companies that are willing to buy most life insurance policies. If your mother no longer needs her policy, she should definitely look into this. One resource that’s available to her is , which may also be reached at (877) 321-8080. Your mother paid insurance premiums for most of her life waiting for a rainy day. It’s pouring outside. Open the umbrella.

Len & Rosie

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at (707) 996-4505, or on the Internet at Len also answers legal questions each weekday, noon-12:45 p.m., and Sundays, 4-7 p.m. on KGO Radio 810 AM.

Len Tillem and Rosie McNichol are elder law attorneys. Contact them at 846 Broadway, Sonoma, CA 95476, by phone at 996-4505, or on the Internet at Len also answers legal questions each weekday on The Len Tillem Show, a podcast available via iTunes, Facebook, and

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