Life Insurance Settlement

What is a life insurance settlement? Basically, if you own a life insurance policy and wish to sell it for a lump sum, you can. Instead of returning it back to your insurance company, the person purchasing it becomes the new owner and is responsible for all of the payments from the point of purchase. The amount paid for the policy based on a percentage of the policy's net death benefit, and represents the present day value of the policy. This purchase price is determined by considering the insured's estimated life expectancy and the cost of premiums to keep the policy in force for that period of time.

While some may be unfamiliar with life insurance settlement transactions, it originally grew out of the viatical settlement industry. A viatical settlement enables someone facing a terminal illness such as AIDS, to utilize the present day value of their life insurance and derive an immediate need for cash to ease the financial burdens that can be caused by the high costs of medical care.

Who qualifies for life insurance settlement? Basically anyone who has whole life insurance; term life insurance; and policies involving life insurance trusts. These are non-contestable policies which are held for at least two years. It doesn’t matter who owns the policy; as long as the insured qualifies. The policy can be owned by the insured; a family member; charity or business.

There are two types of life insurance settlements. A senior settlement policy enables the owners to sell their existing life insurance and derive a percentage of the policy’s face value in excess of the cash surrender value. This life insurance settlement is vital to any senior who needs immediate cash for family or medical emergencies. The second type of life insurance settlement is the viatical settlement, which has been mentioned earlier.

Why is life insurance settlement so important today? In the past, if a senior owned a policy that was no longer wanted, needed or affordable, there was no option but to lapse, cancel, or surrender the policy back to the carrier for the cash surrender value. Now, life insurance settlements allow qualified policy owners to liquidate a policy for an amount much higher than the cash surrender value. Seniors can take advantage of important financial opportunities using the proceeds of an unwanted, unaffordable or obsolete life insurance policy.

Additional benefits of life insurance settlements include: non-payment of premium expenses; supplemental income; needed funds for treatment of illnesses; and a higher cash payout. If you or your spouse is ill, life insurance settlement is the method of choice to help supplement the ever-increasing costs of health care.