Did you know that life insurance policy is an asset? Just like a house or car, it can be sold. Yet seniors are canceling their life insurance policies at an alarming rate.

According to the Insurance Studies Institute, 2.5 million seniors canceled their life insurance policies last year, and that’s after paying tens of thousands ofo dollars of their hard-earned money in premiums over their lifetime.

Why do people cancel their life insurance coverage? It likely was originally purchased to guarantee some needs and desires for the future. It may have been intended to pay off a mortgage, guarantee college funds for children,, maintain lifestyle for a surviving spouse, or to fund a business buy-sell agreement or key-person insurance. Whatever the reason, over time financial priorities may shift, making that insurance coverage no longer needed or wanted, or it may no longer be affordable. Perhaps a term policy is ending, a spouse has passed away, the house is paid off, a business has been sold, or the insured simply needs cash.

Unfortunately, out of those millions of cancelations last year, only 3,100 life settlements were executed. The main reason being that they were not aware that life insurance settlements existed.

Instead of letting a life insurance policy lapse, there is a better solution. Like any other asset, it can be sold utilizing a life settlement. Simply put, a life settlement is the sale of life insurance policy to a third party, usually an investment group or company, for cash. The buyer then becomes the owner and beneficiary and pays all future premiums. However, the insured does have the option of selling a part of the policy and keeping the balance for his or her family.

Almost any type of life insurance can be sold — universal life, whole life, second-to-die, even a term policy. Studies from the Wharton School and London Business School have shown that even if a policy has a cash value, a life settlement typically yields, on average, three to five times more than the cash value.

There are no restrictions on what the seller can do with the money. A life settlement gives a senior good opportunity to help fund retirement income, pay for long-term care, donate to a favorite charity, or take that dream vacation.

Life settlements have been legal since 1911, when the U.S. Supreme Court decision Grigsby v. Russell was announced. However, for the protection of seniors, life settlements are regulated by state departments of insurance across the country. The process is very transparent. In order for a life settlement to be consummated, signatures of the insured, the owner (if not the insured), the beneficiary, and a letter of competency from the family physician is required. A 30-day escrow account is then established, giving the senior the opportunity to change their mind, with no financial penalty.

A survey by the Insurance Studies Institute indicated that ore than 90 percent of those seniors surveyed would have considered a life settlement had they known about it. Doesn’t it make financial sense to consider a life settlement instead of letting a life insurance policy go?

Irv Selman, a member of Moving Seniors Forward, is the owner of Selman Insurance Services, a brokerage agency with more than 100 sources that buy life insurance policies. You can reach him at 818-590-6910 or irv.selman@gmail.com. License #0503817.