Life insurance settlements as a hedge against inflation


What would you like to know

  • In June, consumer prices rose at the highest rate in 13 years.
  • For some consumers, the sale of an unwanted life insurance policy could help compensate.
  • Permanent policies will generally sell for longer than term life insurance policies.

For agents and advisers under the age of 50, the term “inflation” does not have a huge meaning beyond the definition in the manual. Most people in Gen X and younger didn’t experience the specter of inflation that haunted the 1970s, but their clients did.

Many baby boomers, who are prime candidates for life’s settlement, were entering financial age in the 1970s, when prices and interest rates were out of control. High gasoline prices and mortgage interest rates have received the most historical attention, but rising costs for many commodities have also been of great concern.

Seniors today remember those times of inflation, and it is absolutely a concern for anyone working to protect their retirement nest egg. Rising prices and the cost of living are the great fear of anyone who retires or is considering retirement.

The latest figures

Recent news proves that inflation is on the minds of many, as the government recently announced that consumer prices in the United States rose 5.4% in June from the previous year, now inflation at the highest annual rate in 13 years.

According to the Bureau of Labor Statistics, gasoline prices are up 56% while fuel oil is up 50%. Used cars and trucks increased 30% and air fares 24%. This list is growing, as auto insurance is up 16% and natural gas is up 13%. Medical services, electricity and many other costs have also increased, perhaps only a few percentage points, but have risen nonetheless. And we’re also seeing inflation in grocery stores, although the price increases aren’t as dramatic. (Except for chicken wings. For some reason, the prices of chicken wings are skyrocketing. It’s time to become a man with the legs.)

A secret weapon

For inflation-conscious clients with life insurance, a policy appraisal is a good recommendation. They need to understand that they have an option if they have a life insurance policy, as life insurance settlements pay cash for clients who need to supplement their income – and an insurance settlement – life is not correlated with the stock market.

For clients with older term or whole life policies, they need to understand the value of a policy if they are to sell it to offset rising costs. The life settlement market is also not aligned with the stock market, so it offers an attractive “hedge” against all kinds of declines. Policies that have been nearly forgotten could become a financial lifeline for those affected by rising costs. Any client who is worried about inflation or their long-term financial means should have their life insurance policies appraised.

Term Life vs Permanent Life

As inflation rises, the big loser is term insurance, as the ultimate value of that term policy goes down. Due to inflation, the amount of life insurance your clients buy today will not be worth the same amount in the future.


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