Canadian seniors deserve right to sell their life insurance, says advocate

by Leo Almazora26 Jul 2017
Canadian seniors are being prevented from adopting a practice that could unlock “billions of dollars” from their life insurance policies, according to one advocate.

Many countries around the world allow seniors to resell their unused, in-force insurance policies in an open and free secondary market, according to a piece published by the Toronto Sun. Through a practice called life settlement, such policies can be sold for an amount that’s more than their cash surrender value, but less than their death benefit.

“In the United States alone, more than $7 million a day is paid to people through life settlements,” said Leonard Goodman, founder and chair of the Life Insurance Settlement Association of Canada (LISAC) and author of the think piece.

However, Goodman said, regulations in six out of ten provinces prevent a well-regulated secondary market where life insurance policies can be bought and sold. “For decades, Canadian life insurers have lobbied against changing these regulations, and are fighting to include regulations in the other four provinces,” he said.

Goodman claimed that over 80% of life insurance policies are either cancelled or expire without a claim ever being made, which means many seniors own assets they ultimately do not benefit from. Allowing life settlements would provide a much-needed source of retirement funding for seniors, and it would let more people benefit from otherwise unused policies.

“The biggest problem is that seniors are not aware of this unfair and egregious practice,” he said. “Most legislators do not know much about life settlements. And Canadian insurance brokers and financial planners either don’t know or cannot properly inform their clients.”

According to Goodman, most insurance brokers rely on insurance companies and face a risk of getting their license terminated by an insurance provider, so they don’t recommend life settlements to senior clients.

“[I]f we can get provincial governments to recognize the rights of seniors and change the regulations, it will significantly help millions of seniors who are struggling financially in retirement,” he said, calling for life settlements to be made into “a ballot box issue in the next election.”


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COMMENTS

  • by Loan arRanger 2017-07-26 2:26:22 PM

    Leo, while I agree that Canadian seniors (or even non-seniors) deserve the right to SELL their life insurance, just like they can sell their house or car, to whomever they want and at whatever price they feel is FAIR, I think they should also have the right to BORROW against the EQUITY in their life policy just like they can take out a REVERSE MORTGAGE on their home at a reasonable interest rate through HomEquity Bank.

    Once they have sold their life policy, not only will they have to pay CAPITAL GAINS TAX on the disposition but if they were to suffer an unforeseen accident such as a plane crash soon after the sale their ESTATE or FAMILY would receive nothing, even if their Life Expectancy had been 10 years.

    A far more consumer-friendly approach is that promoted by www.life-funding.com which has a DISCLAIMER that it is NOT available to Ontario residents INSIDE Ontario ,as according to FSCO this is also ILLEGAL, even though PAY DAY LOANS are legal and regulated!

  • by FMV calculator 2017-07-26 2:51:37 PM

    Even if Canadain seniors are allowed to sell their life policies they should first be aware of its true economic value as per the http://www.quatloos.com/uconn_deloitte_life_settlements.pdf .

    Unless they are going to lapse or surrender their life policies, they should consider and encourage their children to take over paying the future premiums to obtain a TAX-FREE Death Benefit OR consider DONATING the life policy to a Canadian Charity and receiving a charitable tax receipt for the actuarial Fair Market Value which would be considerably more than the CASH they would receive if they sold it, and could be used to recover 40% of their taxes over the next 5 years.

    For more info please contact me at dekahan@gmail.com .

  • by LIFE INSURANCE SETTLEMENT ASSOCIATION OF CANADA 2017-10-23 5:03:11 PM

    Lets look at both of the above comments. First, if a senior has determined in his/her circumstance that a life settlement is the best choice, it means that cash is needed or wanted. In a regulatory arena, that senior will have discussed his/her personal tax position with advisor's. A "loan" requires interest to be paid or accrued. Either way that increases the obligation and conversely reduces the value of the asset.
    Now lets look at FMV- The old adage "charity begins at home" would seem to fit here. A senior needing to enter into a life settlement needs cash not a tax receipt. You are assuming that the senior has taxable income. If they did ,likely would not require a life settlement.