Life Insurance Settlements|A Financial Tool

Life settlements and Policy cash value

Under certain circumstances your life insurance policy can be used as a life settlement.

In tough economic times, life settlements tend to be on the rise; but they are not a good financial move for every life insurance policyholder.   Check with your financial planner before making a commitment to a life settlement transaction.

If your financial situation changes, maybe a job loss or divorce for example, you may consider a life settlement an optional source of funds; but do your research first.

Many life insurance policyholders do not know what a life settlement is or that they may have the option to use a life settlement.   Not all life insurance policies can be used in life settlements.

In case you are unfamiliar with what a life settlement is here’s a simple summary:  a life settlement is when the owner of a life insurance policy sells their life insurance policy to a third-party for a fee.

Using Life Settlements As A Financial Tool

Where Do You Start?

  • Your Life Insurance PolicyThere are company’s that specialize in life settlements.
  • There are financial planners or financial brokers who specialize in life settlements.
  • Your life insurance agent may not work with life settlements but may be able to refer you to a financial planner that does.
  • How it works is, the life insurance policyholder enters into a transaction with one of these life settlement providers.
  • The life settlement provider pays the policyholder for the life policy and then takes over the premium payments.

What Types Of Life Policies Work With Life Settlements?

  • Life policies that build up cash value are used in life settlements.
  • A life insurance policy has to have cash value for the life settlement company to work with.
  • Term life insurance policies are not used in life settlements because there is no cash value build up in a term life policy.

When To Use A Life Settlement?

  • When you can get paid a sum greater than the life insurance policy’s cash surrender value.
  • When you no longer feel that you need the life insurance policy for the insurance value or the cash value build up.
  • Maybe the life insurance policy is under performing, the cash value is not building up as fast as originally projected.
  • You need money, and feel as if you have no other alternative.
  • You can not longer afford the premiums on your life insurance, but you want something back from the policy.

Are There Other Alternatives?

  • Before considering a life insurance settlement you may want to research other alternatives.
  • Borrow against your life insurance policy cash value.
  • Take out a loan.
  • Let the life insurance policy lapse.
  • Surrender the policy.

A life settlement is not for every one.  Some policyholders are not comfortable enough or have a financial need that’s strong enough to do a life settlement.  Do your homework ahead of time.

Ask your financial planner and life insurnce agent for advise and direction before making any commitments.


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