ARE YOU A LIFE SETTLEMENT CANDIDATE?
These days, policy holders should be aware of all the options available to them concerning their life insurance polices. Normally, if a death benefit is not collected, policyholders either allow their policies to lapse, or surrender the policy for the current cash value. However, many policyholders are not aware that they may have the option of selling their policy for an amount generally greater than the cash value in a life settlement transaction.
Before deciding whether you are a candidate for a life settlement, there are a few things you should be aware of. First, a life settlement refers to the sale of a life insurance policy, frequently through a broker or financial planner. The sale of this policy results in a cash payment that is generally much more than the surrender value a person could get for their policy from the insurance company. Once a person enters into a life settlement transaction, they agree to revoke all rights to their policy upon payment of the settlement. If your life insurance policy is no longer meeting your needs or you can no longer afford your premiums, a life settlement may be a more beneficial alternative to surrendering your policy or letting it lapse.
You could be a candidate for a life settlement for a variety of reasons. For example, a seventy year old policy holder with an insurance policy five hundred thousand dollars is eligible for a life settlement, provided they have a life expectancy that is less than twelve years. Subsequently, a policyholder can also become eligible if the policy is lapsing or being surrendered. Other eligibility requirements for a life settlement transaction include a situation when current policy premiums are too expensive, a need for new insurance, if the insured outlives the beneficiaries named in the policy, an estate tax change, bankruptcy (provided a liquidation of assets have occurred) or a change in the health status of the insured individual.
If a life insurance policyholder meets one or more of the above requirements, then they are a supreme candidate for a life settlement. You may want to strongly consider entering into a life settlement transaction as part of an effective financial plan. Typically, the sale of a life policy results in the cash being used to purchase a more effective life insurance plan, or to pay for expected costs without liquidating other assets. In order to determine your eligibility for a life settlement, a policyholder will usually be expected to submit a signed authorization form to a broker who will submit the policy to multiple life settlement companies. After that, the settlement companies with gather all of the necessary documentation needed and will submit bids. If the offer is accepted, most likely from the highest bidder, they are required to submit an acceptance form. Necessary signatures are obtained, and all ownership rights are transferred to the buyer, while the money is promptly given to the previous policyholder.
In short, a life insurance settlement can be a great alternative to letting your policy lapse or surrendering it for the cash value. If you're eligible for a life settlement, it's advisable that you speak with a financial advisor to understand the complete process and potential benefits of selling your life insurance policy for cash.