Do you know what you can/should do with your life insurance when you’re planning to / are not able to use or can no longer afford it? [If so, then maybe you want to consider a life settlement?] Life settlements perform the role of enabling the insured to dispose off their policies through third-parties and in return, they get a cache amount, which is more than the cash surrender value but less than the policy’s death benefit. This manual is designed to receive an introduction to all of the different life settlements and the necessary steps to take before you start shopping for them.
What is a Life Settlement?
A life settlement is a transaction in which the seller, i.e. the policyholder, transfers to a third party the policy of life insurance. The buyer of the policy is the new owner who needs to pay the premiums of the policy. After the death of the insured, the buyer is entitled to receive the death benefit. Life settlements are frequently chosen by individuals who no longer have a need or no longer can afford to support their life insurance policies and are looking to receive financial compensation from them.
Who is Eligible for a Life Settlement?
For the life settlement to take place, there are conditions that the policyholder must satisfy. For instance, the insured must be (usually 65-70) of a certain age, and the policy must have a death benefit of at least a certain amount (usually $100,000 or more) the homeowner’s policy premium must be paid on time and there should not be any lapses in premium payments.
Benefits of a Life Settlement:
- get a lump sum payment which is better than the loan value of the policy.
- Won’t have to pay anything.
- Premium payment is not a necessity any longer
- Get money from an insurance plan you no longer want or one that you can’t pay for anymore
- Keep the policy active and do not cancel it outright; this would prevent loss of the funds paid in the form of premiums
- Determine if your particular policy is suitable for a life settlement
- Receive quotes from multiple life settlement companies
- Find the best life settlement provider
- Confirm the life settlement contract and get the payment by means of a lump sum
- Assign the policy ownership to the purchaser
- The lump sum payment may not be what you expected
- The buyer may default in payment, a situation that may cause the policy to lapse
- The policy may contain some limitations that restrict its sellability
- The policy’s death benefit falls short of its expected amount when there are changes in the health of the policyholder