Reverse Mortgage Guide

Should you sell your life insurance policy? You should buy a life insurance policy just to have something to sell? How does such an arrangement compare to a reverse mortgage as a way to raise cash?

Writing on Newsday, Saul Friedman says “We were among the first, more than a year ago, to call your attention to “life settlements.”

“That’s a new and, to my mind, a potentially unsavory business now referred to as “Stranger Owned Life Insurance” (SOLI), wherein you sell your life-insurance policy to an investor for more than its cash value. Or, closer to fraud, you are advised to buy a big policy in order to sell it to the highest bidder, and you name the investor as beneficiary.”

Reminds me of the old Groucho Marx show, You Bet Your Life….

“For cash-strapped older people on fixed incomes,” says Friedman, “it’s tempting to sell a long-held policy in order to get some cash and quit paying premiums, rather than turning it back to the insurance company for its cash value and going without insurance. But taking out an FHA-insured reverse mortgage on the equity in your home is safer, and you continue to own your home.”

Friedman says it’s better to borrow against a universal life-insurance policy because unlike the sale of an insurance policy the proceeds from a loan are not taxable income. This is similar to a reverse mortgage because, again, there are no taxable proceeds because the tax derived from a reverse mortgage is loan money and not sale money.

Friedman mentions two companies that make loans against insurance policies, for those who want to look into this further.

And for those who really want to look into this further, please speak with your insurance broker and an attorney who deals with elder law before signing anything with anyone.

For the full story, see: Gray Matters: SOLI: a stranger is your beneficiary

Related Resources You May Like

This entry was posted on Monday, August 4th, 2008 at 6:01 am and is filed under Reverse Mortgage . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.