What Is a Life Settlement?
A life settlement is the cash you receive after you have gone through the sale of your life insurance policy. Simply put, it is the sale of a life insurance policy to a third-party investor. When you or your loved ones no longer require life insurance, the option to cash in life insurance is a decision that many people consider.
Can You Cash Out Life Insurance?
As most know, the life insurance industry is very complicated, with so many types of policies available, its almost impossible to make a logical decision when choosing and purchasing one. If you plan to cash out life insurance policy, you would have to have a ‘whole life insurance policy’ to sell, not simply just a ‘term life insurance’ which has an expiration date. The good thing about a whole life insurance policy is that it builds up cash value over time which can then be surrendered in exchange for a cash amount; the longer you maintain it, the more you can cash out with.
- Policy owners sell their life insurance policy to a life-settlement company in exchange for money
- To qualify for a life settlement, you must be over 65 years old
- You must have a policy death benefit of $100,000 minimum
A bonus when opting for a life settlement is that you have the potential to render more money from the policy than it is actually worth. Opting to cash in will give you a rich source of liquidity which oftentimes is needed by seniors and retirees alike.
Things To Consider When You Cash In Life Insurance
Although cashing in sounds tempting and rather lucrative, there are some things to consider prior to doing so:
- You are completely forfeiting your death benefits
- The new policy owner or purchaser will have access to your previous health records
- When you give up your policy, you are required to pay a percentage in commissions of up to 30%, ultimately reducing the amount you end up receiving.
Is A Life Settlement For You?
A life settlement is a wise choice if the cost of maintaining it is simply not worth it any longer. You have to consider if you still require coverage and if the beneficiaries are still relying on the death benefits in the chance that something happens to you. In the chance that you do choose a life settlement, you have the option to use the cash in any which way you wish – something that is appealing to many. With this though, you are required to pay income tax on the gain of the policy and in turn, costing you more in addition to commissions and fees. Policy owners don’t always know what to do when it comes to a life settlement and often times they surrender their policy for far too less. Always be aware and know the cash surrender value prior to selling it.
Speaking With A Life Settlement Broker
Policy owners often lay their trust in the opinions of industry professionals such as financial advisors when it comes to deciding on whether or not a life settlement is the right option. Our life settlement brokers offer valuable information and guide you in the right direction based on your individual circumstances. Financial advisors may warn you that if your settlement plan is worth selling to an investor, it will be worth even more in the long run, therefore, advising that policy owners simply keep it.
Life settlements are almost like real estate in that the life insurance policies are sold over the counter through a confidential transaction via buyer and seller. A life settlement brokers job is to facilitate the negotiation and ensure that the transaction goes as it should. As opposed to selling your policy directly to a life settlement company, it is advised that each individuals go through a broker so that error can be eliminated and buyers don’t get scammed or cheated out of their rightful funds.
Contact us today for more information on cashing out life insurance for a life settlement.