A life settlement is the sale of an existing life insurance policy. The policy owner receives a cash payment as a result of the transaction. The life settlement provider becomes the owner and beneficiary of the policy. Once the policy is sold, the purchaser of the policy pays policy premiums, maintains the policy, and later collects the benefits.
What are some of the factors that determine the settlement amount?
The amount of a life settlement can vary depending on many factors, including but not limited to:
- Life Expectancy
- Premium Expenses
- Policy Type
- Account Value
What are some of the benefits of settling a life insurance policy?*
- Settling a life insurance policy gives the owner the opportunity to obtain a payment that may be far greater than the cash surrender value of the policy.
- The secondary market enables consumers to obtain competing quotes on their life insurance policies.
What are some reasons people choose to sell a life insurance policy?*
- Changes in estate plans or financial needs
- Beneficiaries no longer need the coverage
- Premiums become too expensive to sustain
- Need to buy a new policy that is more in line with current needs
- Alternative to costly conversion from term to universal coverage
- Provide liquidity
- Realize a substantial cash sum while the insured is still alive
*Disclaimer: Proceeds of the life settlement could be taxable, subject to creditors, or may adversely affect your eligibility for governmental benefits. You should obtain advice on these matters from your legal, financial and tax advisors.