What Is A Life Insurance Settlement?
When a senior citizen has an unwanted or unneeded insurance policy they no longer have to let the policy lapse or take the cash surrender value. The policy can be sold in the secondary insurance market in what is known as a life settlement. A life settlement is the sale of a senior�s insurance policy to an institutional buyer for cash. The senior will transfer ownership and beneficial interest to the purchaser for the agreed upon price. After the sale, the purchaser will pays all premiums and fees associated with the policy and will collect the death benefit upon the policies maturity.
All senior citizens over the age of 65 with an insurance policy in excess of $250,000 are eligible for a life settlement transaction. Life Insurance Settlements are one of the most consumer friendly and non invasive financial transactions available to senior citizens. By using the insured�s existing medical records and current mortality tables S & P rated actuaries will obtain life expectancies. Using the inforce insurance illustration of the policy or the document the demonstrates how much the premiums will be every year, and the life expectancy, institutional buyers will make cash offers to the insured for the policy.
When an offer from the purchaser is accepted by the seller, the seller will transfer the ownership of the policy to the purchaser. Once the insurance carrier makes the ownership and beneficial change, the purchaser has three days to pay the seller in full. On most life settlement transaction the purchasers have 15 day recession periods should the client decide not to sell the policy. The purchase price of the policy is tax free up to the total amount that the seller has paid since the policy was originally issued. Any amount over premiums paid is considered long term capital gains.
Recently, a female age 77 in great health with a $1,000,000 universal life policy who purchased the policy for estate planning decided that the policy was no longer needed. She inquired about selling this policy that she minimally funded each year and thus it had no cash value. The policy was purchased by institutional buyer for $310,000. On average clients can expect offers that far exceed the cash surrender value of the policy.
In addition to policies that are unwanted or unneeded, life settlements are available to insured�s that still need the protection. Many senior citizens have policies that they still need but are becoming cost prohibitive or have term policies that are about to lapse. A life settlement transaction can be utilized in these situations to sell the existing policy and using the cash received from the purchase of that policy to buy a new policy and lower the premiums. This type of transaction are referred to as insurance re-finance
All senior citizens should speak with their agents and advisors to have their policies evaluated on the secondary insurance market for either potential sale or for re-finance options. Life Settlement brokers work with insurance agents, financial planners and directly with the insured to make sure the best price is offered to the client. When choosing a settlement broker make sure they are fully licensed in all states.
Where Can I Get More Information?
If you wish to learn more about life settlements and selling your policy in the secondary market visit Life Settlement Analyst.
