At some point of time in life you think you are all set by settling your kids, all mortgages paid off, and you find no reason to pay the premiums anymore or in another scenario you can’t afford to pay increasing premiums each year or you have a term policy that is about to lapse you can take wise decision of selling your insurance policy to an investor for cash value more than surrender value but less than death benefit. You can decide to sell if you feel you are over insured.
In life settlement you get cash on sale of the insurance policy and the buyer will continue paying the premiums and get the death benefit when you die. In most cases a senior-aged person who perhaps needs cash for his treatment or bear the living expenses.
The final amount that you get is evaluated on various factors like age, type of policy, terms and conditions and status of your health. Since there are no hard and fast rules on the value you get, it better to approach a life settlement provider or a broker they can get you the buyer and negotiate to get the best price for a fee. There are some expenses involved in the sale of insurance policy that you should be aware of are transaction fees, the fee charged by provider and taxes etc. in a case study wherein the policy with a cover of $1.25 million and cash surrender value as $190,000 was sold to a life settlement company for $415,000.
There are various options available other than life settlement you can take a loan against your policy, you can opt to reduce the amount of the premium by reducing the death benefit or get the accelerated death benefit, surrender the policy to the insurance company. Deciding what works for you the best
Life settlements and viatical settlements are different wherein life settlement companies usually buy a policy of people aged 65 and above having a decline in health but do not have any terminal illness and the face value of the policy is at least $100,000. Viatical Settlements Company purchase the policy of a person who is terminally ill having life expectancy from six months to two years, the less the life expectancy the greater is the sale value e.g if a person is going to die within six months you can expect 80% of the policy’s death benefit and a person who has life expectancy of two years will receive about 60%. The policy is eligible if the type of the policy is a convertible term, whole term, or universal term.
- Be wise and careful while choosing a life settlement company that is licensed from the State, you will not be willing to sell your policy to a life settlement provider who does not hold the authorizations.
- Ask and ensure that the company works with your type of policy.
- There is nothing wrong to check the number of years a provider has been working in the insurance industry. Experience adds to the expertise and abundance of knowledge in dealing with different cases differently and efficiently.
- Ensuring that your records and information are only for evaluation and thus it is the responsibility of the provider to regulate confidentiality of sensitive and personal information through written agreements.
- Keeping a check on the future owner of your policy while dealing with life settlement providers, sometimes providers buy the policy.
- After selling your policy the life settlement provider would want to stay in touch with you regarding your health status knowing and being well informed about how frequently they would be contacting you. You can clearly communicate the mode of communication according to your comfort zone.
These are some of the factors to be taken care of while searching for a right life settlement provider, do your deep research. One more important thing is you need to take this step well in advance because the process takes from a few weeks to few months so plan the sale accordingly.
Don’t close the very first deal let the companies approach you with their value after you find the offer that suits you, go ahead and close a deal if you are good the value being offered, receive a lump sum cash payment for your life insurance policy.
