HomeLife InsuranceA Guide to Life Insurance Settlements

A Guide to Life Insurance Settlements

Life settlements a sale of life insurance policy that in force, wherein you get amount more than cash surrender value but less than the net death benefit.

There can be quite some reasons for which anyone will want to sell it for cash are as follows:-

  • In the case of worst medical conditions wherein you don’t have access to an early death benefit.
  • You need money to support your retired age.
  • You can’t afford the premiums anymore.
  • You don’t need policy any more like in the incidents of spouse death, divorce, no dependent person.
  • Take off all the debts.

How Much Money Can Get From Life Insurance Settlement?

The policyholder normally can expect four to eight times more than the cash surrender value of the policy if he/she sells it through proper and authorized channels. It can be an advisor, Life settlement provider or a broker. The expenditure for life insurance settlement may be varying between 13 – 21% of the death benefit value.

Factors that decide the amount of life settlement include death benefit value of the policy, age and medical condition of the insured, the amount of the premiums, how long they have to be paid for.

Useful Qualification of the Life Settlement

  1. The value and the qualification of the life settlement depend on the type of life insurance policy you have and the premiums. If you universal Life, Whole Life, Term, Convertible Term, Joint, and Second-to-Die life insurance policies, issued by a US-based insurance carrier you are good to sell it.
  2. You are eligible to sell the policy without much effort if you are 70 or more, the less is life expectancy the better chances are to sell policy quickly, though the process may take few weeks to 4-5 months so be aware of that and plant things accordingly.
  3. Also, the important factor considered is the face value of the policy; the face values must be over $100,000.
  4. Insured may have one or more health problems. The key rule of life settlement is lower the premiums and the shorter the life expectancy, the higher is the selling price.
  5. Confidential information such as medical history and health information is required to evaluate the sale value.
  6. You should be aware of the cash surrender value of your policy
  7. Also, you must know how many years’ premiums will have to be paid.
  8. Be well aware of the taxation implication; consult your financial advisor to know how the proceeds of your life insurance sale will be taxed.
  9. A life settlement transaction is complicated and entails the collaboration of several things. Some entities have legal restrictions on the time to act on a certain request during the transfer process; hence, it results in a delay of the transaction. It is always recommended to consult an insurance agent, professional advisor or a life settlement broker or provider even before starting with the life settlement process, particularly if your policy is going lapse or premium payment date is near.

Who Can Buy Your Life Insurance Policy?

Selling insurance policy can be tricky and challenging since it involves legal and financial transactions so selling it through life settlement companies or brokers. The broker charges a commission that can be expensive but it depends on the situation you are in.

The new policyholder will buy the policy for cash and pay all future premium payments and becomes beneficiary of your policy. That buyer may be an investor or institution buys you a policy through a licensed life settlement provider, or the provider the meselves might be interested in buying the policy as stock, bond, etc.

Taking care that provider or broker are licensed (regulated at the state level,), don’t sell it if you are not happy with the amount many professional life settlement providers try and negotiate to get the maximum amount. Explore the channels under which you need to pay the least fees.

The provider or the broker you would like to go with should be transparent with you regarding the fees involved at every step. The information on medical and health records is confidential which you will have to update to the buyer from time to time. The provider should ensure you to protect your sensitive information by providing provide written confidentiality agreements.

Dealing directly with life insurance Settlement Company makes things easy and quick as compared to other channels, and eliminates the intervention of intermediaries that reduces the overheads and also make the process super simple and smooth. Life settlement providers are specialized in buying best life insurance plans of the life settlement market with the best guidance and negotiation they are experts at cracking a fair deal.

Choose any channel for a life settlement, the bottom line is that it should suffice your expectation and should be able to meet the ultimate goal at its best. Doing a bit of research would be a great way to stay protected from any vulnerability.

Ajeet Sharma, the founder of Financegab and a well-known name in the field of financial blogging. Blogging since 2017, he has the expertise and excellent knowledge about personal finance. Financegab is all about personal finance which aims to create awareness among people about personal finance and help them to make smart, well-informed financial decisions.


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