Life Insurance Settlements
Many people are choosing life insurance settlements. Find out more about this option to see if it is right for you.
Life Settlements Explained
What is a life settlement? A life settlement involves the trading of an existing life insurance policy to an interested party for its cash surrender value. This surrender value is often more than an insurer would offer but still less than the death benefits that would be paid to beneficiaries upon one’s passing.
Once a life settlement is made, the policyholder exchanges the ownership rights in return for the liquid cash from the buyer. At times, the party involved may negotiate for a reduced interest in the death benefits available to the beneficiaries. The buyer of a life insurance policy takes over responsibility for the payment of future premiums in exchange for receiving the death benefits on the policy once the insured dies.
Reasons to Choose a Life Settlement
While some people find they can no longer afford their life insurance premiums, you may choose to initiate a life settlement in order to finance your retirement, pay a debt, purchase a home, or even finance the college education of your grandchildren. Whatever the reason, it is always important to carefully consider whether settling is a good option for your personal situation.
What Are the Common Qualifications for a Life Insurance Settlements?
Not all life insurance policies can be sold because there are qualifications that must be met beforehand. Here is an outline of the qualifications:
- As a life insurance policyholder, you need to be at least 65 in most cases. The biggest consideration that most buyers of life insurance consider is your life expectancy, so many will prefer people who are in their senior years.
- Many buyers are most interested in purchasing life insurance policies that are worth at least $100,000. Some buyers are willing to purchase smaller policies, however.
- Manageable premium costs are important. When there is a life insurance settlement, the buyer of the policy is required to pay the premiums until the policyholder dies. For this reason, buyers prefer to purchase policies with affordable premiums.
- Your life insurance policy must be transferable. There are certain life insurance policies that may not qualify for a life insurance settlements. Buyers most commonly look for whole life, universal life, and convertible term life policies.