Life Loses Market Value as Seniors Seek to Unload Their Insurance Policies

[Purveyor]

By Jason M. Breslow

March 26 (Bloomberg) -- Retirees seeking extra cash last year could sell a $5 million life insurance policy to investors for $1 million. Today, the price is as low as $600,000.

Sales of so-called life settlements declined 20 percent in the second half of 2008 as the credit crunch slowed demand, according to a report from Life Policy Dynamics LLC, a Washington-based consultant. U.S. life insurance policies worth approximately $12 billion were sold in 2008.

“You’ve now got more people who would be willing to consider selling than you have buyers,” according to life settlement experts such as Scott Hawkins, an analyst at the Hartford-based asset management firm Conning & Co.

Retirees whose investment portfolios were pummeled by the 38 percent decline in the Standard & Poor’s 500 Index last year are increasingly trying to sell their policies, said Brian Pardo, chairman and chief executive officer of Life Partners Holdings Inc., a life settlement broker. About 360 more people each month are approaching the Waco, Texas-based company about a policy sale, Pardo said.

Senior citizens “are really seriously in financial trouble” with no real way to raise cash besides selling assets that they may not want to part with “at garage-sale prices,” Pardo said. “We don’t have enough investment capital to buy all of that.”

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BLOOMBERG: http://www.bloomberg.com/apps/news?pid=20601213&sid=at0p6bvmQGm4&refer=home

[county worker]

1. What do you do with a 5mil life insurance policy?

You die and leave 5 mil to somebody? Maybe the spouse is stuck with a 5mil mortgage or something I don't know.

If it was to leave to the kids why aren't the kids helping mom and pop out? Maybe the kids are in financial trouble too?

I think this recession or depression will be seen as the great leveler. So many potential wealthy will never be.

Save for a rainy day? OK but just hope your savings are in the ground somewhere and not in some asset that can loose value!