People whose life-insurance policies have accumulated cash value sometimes sell those policies to obtain money they need now. But that can create opportunities for abuse.
While getting cash for an existing life insurance policy may be tempting in tough times, state officials say seniors should know the consequences of such a decision.
The Idaho Life Settlements Act, which went into effect July 1, requires brokers of these policies to be licensed in Idaho and to disclose fees, the value of offers and contractual arrangements.
"This level of transparency is needed in our unstable economy when people may feel pressed to sell life insurance policies for their cash value," said Bill Deal, director of the Idaho Department of Insurance.
In a life settlement, also known as a viatical settlement, an investor buys an existing life insurance policy for up to four times the amount of the policy's cash surrender value. Sellers are usually 65 or older with a policy valued at more than $100,000.
After the seller dies, the investor collects the death benefit.
The market for resale of life insurance policies has exploded in the past several years, according to the Department of Insurance.
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