Life Settlement: What is it?
Have you ever heard of the term Life Settlement and wondered what it meant? Whether you are familiar with the term or not, very few people understand exactly what it is and what it means.
And, admittedly it does sound like some complicated financial jargon, that doesn´t apply to normal people. Something only people in the world of finance might use.
But, understanding about life settlements could literally change your life.
In this short article, we will explain exactly what a life settlement is and how it might just be the most important thing you do this year.
Table of Contents
Life Settlement: What is it?
What is a life settlement?
Are Life Settlements Legal?
Life Settlements V Surrendering the policy
Do I have to be old or ill to get a life settlement?
What is my life settlement worth?
Should you settle for a life settlement?
What is a life settlement?
A life settlement is the complicated term they use for the sale of an existing life insurance policy. A life settlement is the transaction that occurs when one person sells their own life insurance policy to a broker or provider.
Life Settlement = Life insurance policy sale
We are not talking about a life insurance salesman selling you a policy here.
We are talking about ordinary people who have a life insurance policy they have been paying for a number of years, but no longer want or need. These people can sell the policy for a lump sum of money.
This means no more premium payments, no more obligations, just a nice fat wad of dollars sitting in the bank.
Life Settlements are for anyone who has a current life insurance policy that they may no longer need or want.
The seller receives a cash lump sum for their policy and has no further obligations. The buyer continues to pay the outstanding premiums.
Are Life Settlements Legal?
Life settlements are completely legal, authorized and regulated. The court case Grigsby V Russell set a precedent back in 1911 which found that life insurance policies are an asset like anything else that you own and so can be bought and sold in the same way.
In layman´s terms, this means a life insurance policy is your property, like your house, your sofa, or your TV and you can sell it if you don´t want it anymore.
The transaction markets are known as TEP and TLP (Traded Endowment Policies and Traded Life Policies) and there are brokers and providers out there just waiting to buy policies every day.
In the US, trustworthy and reliable life settlement providers and brokers often belong to L.I.S.A.org (Life Insurance Settlement Association) that promotes good practices within the industry.
Life Settlements V Surrendering the policy
When you no longer want to continue paying for a life insurance policy that you no longer need, you may think that you have to surrender the policy back to the insurance company you originally bought it from.
This is certainly one way of relieving the burden of payment for something that you no longer need, but is it the smart way?
The life insurance company will normally pay you a surrender value, but it is likely to be much less than you have paid into the policy and there will be hefty administration fees.
Life Settlements typically pay approx. 4 times the sum that would be paid as a surrender valuation.
That’s right, your policy could be worth 4 times the amount that your life insurance company is willing to pay.
This is because, in a life settlement, the buyer of the policy continues to pay the premiums, so the policy keeps its original value.
The burden of payment is lifted from the original policyholder. You have no more premiums to pay and no more obligations: Just a lump sum of money in the bank.
Do I have to be old or ill to get a life settlement?
Anyone who has a life insurance policy that they have been paying for several years can get a life settlement.
You don’t have to be ill or old or have a life-threatening disease. If the life insurance policy that you have is no longer right for you then you can sell it. You can jusy ask a Life Settlement Service for a valuation National Service Provider:Contact Form.
It´s as easy as that. You don’t have to jump through hoops and you certainly don’t have to continue paying for a financial product that isn’t right for you.
What is my life settlement worth?
That is very much a “how long is a piece of string” type of question.
Each and every life policy has different circumstances surrounding it.
A life settlement service will want to know a few simple facts. The most important ones being the value, type, and term of the life insurance policy and what premiums you are paying.
This is because the buyer-National Service Provider:Contact Form will have to continue paying those premiums in order to benefit from their purchase.
These facts, along with your age and health, allow them to make a valuation of your policy, and offer you a fair price.
Typically, a $50,000 policy belonging to a 65-year-old man would be worth around $8000 to $10,000.
The surrender value of that same policy might be worth just $2000 – $3000.
That is a huge difference and could mean a life-changing sum of money.
