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Life Settlement – Things You Should Know

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life settlement for seniorsHave you heard of life settlement? Well, if you are wondering what it is, it can be defined as selling your life insurance policy. Just like you can sell your house, car or any other asset, you can sell your life insurance policy and the transaction is called life settlement.

What is the Value of Your Policy?

You can get cash settlement when you sell your life insurance policy. This amount is approximately 20% of the worth of your policy death benefit. However, the actual amount may differ widely from policy to policy.

Life Settlement for Seniors

Life settlement is preferable to seniors for many reasons, such as:

  • Funding for a better retirement
  • Clearing a debt
  • Purchasing a retirement home
  • Funding your grandchild’s education

Funding Retirement

It’s a great option to sell your life insurance policy when you no longer need it. Rather than letting the policy lapse or surrendering it, selling it is always a practical option and you can get its fair market value if you sell it through a good organization like Life Settlement Calculator.

worth of your policy

Is Life Settlement for You?

Before taking any further step, ask yourself if you are in one of the following situations.

You are planning to lapse your insurance policy: Since you are finding it too expensive to pay its premiums due to any reasons like increasing costs or other financial priorities.

There is a need of extra funds: Probably you want to save for a potential medical expense or some large purchase.

You just don’t want your policy anymore: You have completed all your responsibilities, your children are grownup and well settled and you don’t think a life insurance policy is needed anymore.

How does a Life Settlement Work?

It takes around 3 to 8 weeks for a life settlement to complete. During this time, you should find a licensed provider interested in buying the policy from you. Then there will be a diligence period during which the provider will inquire about your health. After this, they will make an offer and if you want to accept it, you will have to transfer the ownership and beneficiary of the policy. Then you will be paid for the settlement offer through an escrow account. Once the insurance company changes the ownership and beneficiary, you will be notified so.

Do You Qualify for a Life Settlement?

Selling your life insurance policy is not totally dependent upon your decision. It’s also necessary that the buyer should feel that it’s a good deal. For this, they should know that the premium payments will be practical for them until your death and they can get the death benefit. This makes the following things necessary:

You should be more than 65 years old: The most important factor in buyer’s equation is your life expectancy.

Your policy should be of the value of at least $100,000: Policies below this value are not generally worth the cost to transact to the buyer.

Buyer should be able to manage to pay the premium costs: Though all other factors are very good, the buyer will necessarily confirm if he can pay the premium or not.

The policy should come in a certain category: The common categories of transactable policies are Whole Life, Universal Life and Convertible Term Life. You can even sell Variable Life policies but only to a fewer buyers because of their designation as a security.

life settlement

What After You Sell Your Policy?

You may wonder what happens once you sell your life insurance. Here it is:

Get Cash: You will get cash at the time of the sale.

No Longer Need to Pay Premiums: Once you sell the policy, you no longer need to pay premiums because they buyer will pay them.

You are No Longer Covered: Once you sell the policy, the buyer will own it. Upon the death of the underlying insured person of the policy, the insurance company pays the death benefit to the buyer.

All in all, life settlement is a preferable option in many situations. Evaluating yours, you can understand whether you should take it or not.

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