The NASD issued an investor warning on Thursday, advising senior citizens to think twice about selling their life insurance policies to a third party. While such deals typically bring in a larger sum that the policy’s cash surrender value, they are typically less than its net death benefit, the NASD said.
“Life settlements are not for everyone,” said NASD Chairman and CEO Mary Schapiro. “While they can be a valuable source of liquidity for people who no longer want or need their current policies, life settlements can have high transaction costs and negative consequences for your financial situation.
“And it is very difficult to determine whether you’re getting a fair price for your policy. The best advice to is proceed with caution.”