“How Life Settlements Work: An In-Depth Look”
Introduction:

Life settlements are the type of deals in which policyholders have the option to sell their life insurance policies for a lump sum payment. Choosing this option can be very attractive to the policyholders who have either outgrown their need for coverage or no longer can afford it. However, a well-informed decision is, therefore, mandatory to understand properly how life settlements work first.

Qualifying for a Life Settlement:

Policy eligibility: The existence of a life insurance policy does not necessarily mean that a life settlement is an option. Factors like the policy having a $100,000 death benefit or the policyholder being at least 65 years old play a crucial role in the process.

Health requirements: To qualify for a life settlement, the policyholder should have a life expectancy of ten years or less, which is determined by medical underwriting.

Selling process: When your life insurance policy is to be transferred, you have to make a duplicate of the policy to the new owner and give him the medical questionnaire also. The details will be analyzed by a life settlement provider, who will propose a price for it.

Determining the Value of Your Policy:

Factors affecting value: Your policy will be appraised taking into account the amount of death benefit, policy’s premiums, your age and health, and the rate of interest among other things.

Understanding the offer: After a life settlement provider has examined your policy and medical data, the provider will suggest an amount for the policy. This amount will be lower than the death benefit, but, of course, higher than the cash surrender value of the policy.

Acceptance of the offer: When you agree with the offer, the life settlement provider shall shell out a lump sum amount for your policy.

Cancellation of the policy: Once the policy has been sold, it will be canceled and the life settlement provider will be the policy’s new owner and beneficiary.