Life Insurance Settlement - What Does It Mean?
What exactly is life insurance settlement and how does it work?
There are a number of terms that are used to describe basically the same process. You may see it referred to as life insurance settlement or life settlement. Viatical settlement or senior settlement are other terms that refer to the same type of transaction.
Whichever term is used, life insurance settlement is when you sell your existing life insurance policy to somebody else for immediate cash. You get the benefit while you are still alive. Life insurance settlements usually involve those who are terminally or chronically ill or who are over age 65. With a life insurance settlement you can expect to receive more than the cash surrender value of your policy but less than the full face amount.
The amount you get depends on a number of factors, including the type of policy, the face value, the premiums, and the age and medical condition of the insured. Once the transaction is completed, you receive cash (part of which may be tax tree), the buyer takes over payment of the premiums and receives the full death benefit when you die. Several factors have contributed to the growth of this business of buying and selling of life insurance policies. The high medical costs related to AIDS probably had the greatest impact. The viatical settlement allowed the ill individual with a life insurance policy a better option than simply cashing in the policy or letting the premiums lapse. This meant the policy holder could get cash during what remained of their lifetime. A second trend that affects the life settlement industry is the aging population who may have paid for life insurance for many years but now have other priorities and would like to obtain cash from the policy. In a nutshell, life settlement has created a system that enables policy holders to get more than the cash value offered by the insurance company and they can get that cash during their lifetime. There are two sides to the transaction. A life settlement broker acts on behalf of the policy holder who wishes to cash in their policy and works to get the best deal possible. The life
settlement providers are the buyers who offer a specific price for the policy. A number of life settlement providers may submit bids to the broker and some negotiation follows to arrive at the best offer. Now that you know a bit about what life insurance settlement is, you may be wondering if it is a good option for you. Your financial adviser is a good place to start in evaluating whether or not this would be advantageous in your particular circumstances. In most states the process is regulated. If you think this may be for you, you should find out what regulations apply in the area where you live. That will help you to find reputable and licensed people to assist you to negotiate the best return for your situation. Learn all you can about the life settlement process. Don't forget to examine the tax implications before you make your decision. If you do decide to proceed, ask if there are any
fees and whether you are obliged to accept any offer you receive. Life settlement offers a valuable option in the right situation. It makes sense to evaluate the impact it could have on your financial planning.
| 