The Governor of the state of Maine signed into law a bill requiring life insurance companies to inform policy owners of the state their legal right to engage in a life settlement instead of allowing a policy to lapse or be surrendered. Maine and Washington State are now the first two states to pass this important consumer protection law. Many more states, including Kentucky and Indiana, are currently considering the laws adoption.
The consumer protection law also prohibits insurance companies from engaging in anti-consumer activities. It will now be illegal for insurance companies to stand in the way of people who would be better off to sell their insurance policy through a life settlement, instead of surrendering it back to the insurance company for much less money or allowing it to lapse. As much as 90% of life insurance policies issued are allowed to lapse every year, and to date, life insurance companies do not inform people of life settlements as an alternative option. This law will begin changing that intentional oversight around the country.
“These new consumer disclosures and consumer protections represent a substantial step forward in ensuring that seniors who are faced with the lapse or surrender of unaffordable or unwanted life insurance policies can sell their policies and are not prevented from doing so by the acts of big insurance companies,” said Doug Head, Life Insurance Settlement Association (LISA) Executive Director. “These measures respond to the documented evidence of carriers trying to block life settlements through threats to insurance agents and providing misleading information to seniors.”
With seniors and baby boomers facing economic challenges and shrinking government dollars to help pay for the costs of senior housing and long term care, the need for alternative financial options is at an all time high. Options such as life insurance settlements, which can pay out as much as 500% more than the cash surrender value of a policy, have been suppressed by the life insurance industry because it cuts into their profits. But now, instead of allowing a life insurance policy that has re-sale value to just terminate, seniors can tap into that value through a life settlement. With this law passing, the citizens of Maine and Washington will now be informed of the life settlement option as a legal right to raise the most money possible through their valuable asset– and soon many more states around the country will benefit from this important consumer law.