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?
- There 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.