Life settlement funding is gaining awareness as a means of obtaining additional cash and financial comfort in senior years.
In the past, life insurance benefits were only realized upon death; however, in recent years, life settlements have emerged and evolved to become a viable way of enjoying the rewards while you are still alive. Basically, there are two ways that you can capitalize on your life insurance policy and obtain living benefits.
A Viatical Settlement is the sale of a life insurance policy applicable for people who have become terminally ill. Life Settlement funding is fundamentally similar, but without the chronic illness stipulation, making it possible for seniors to liquidate their unwanted or unneeded life insurance policies for a cash value.
Life settlements are becoming more commonplace as experts and advisors are learning of the benefits and advantages to this financial planning tool. Customers are now realizing the option of selling their policies on an open market for a greater price than the surrender value they would receive from insurance companies.
How Does It Work?
If you have any type of life insurance policy that you wish to liquidate, a broker or life settlement company will help you find an investor who will purchase your policy for an agreed upon cash amount. The buyer now becomes the beneficiary, paying the premiums from the date of transaction, and receiving the benefits upon your death.
The settlement will be somewhere between the surrender value and the benefit payout amount, with the offer depending on such factors as your age, life expectancy, premium costs, insurance rating, and other pertinent details outlined in your policy.
Life settlement funding requires no application costs, no upfront or out-of-pocket fees, and is not a loan so none of the money will need to be paid back. Furthermore, it is not based on your income level or the value of your assets, and there are no rules or restrictions on how you can use the additional funds. You will be able to use the money however you desire, whether that be supplementing income, covering medical costs, paying down debts, taking a vacation, or donating to charity.
It is important to note that your life settlement broker will be entitled to a fee; however, this charge is included in the offer so it will not be an additional expense for you.
When Should You Consider Life Settlement Funding?
Life settlement funding can be considered for a variety of reasons and used as a tool to meet several different needs.
1. Your financial situation may have changed or you may have an immediate need for additional cash.
2. Policy premiums may be too expensive.
3. Your coverage needs or beneficiary may have changed due to the death of a spouse or retirement. Certain coverage may no longer be required or there may no longer be anyone who will benefit from the policy.
4. You may be suffering from an illness or require long-term care.
5. You may be considering surrendering your policy but want a more lucrative alternative.
6. You may think your insurance is underperforming and would prefer to get cash out of your policy now so you can use it for immediate benefits or put it into investments with higher rates of return.
Reasons will differ depending on personal situations, and a good financial advisor will be able to tell you if life settlement funding is the right option for you.
Who Is Eligible?
Though regulations and guidelines may vary, life settlement is generally available to seniors 70 years of age or older with a life expectancy of 3-15 years who have a life insurance policy that has been in place for a minimum of 2 years and a benefit amount of at least $250,000.
You can take a simple test to see if you are eligible or qualify as a candidate for life settlement funding. Complete a quick questionnaire online, or consult with a professional financial advisor.
Life settlement funding can be an excellent way to obtain additional cash; however, it is important that you have a thorough understanding of this option and are aware of all the regulations for your particular state. It would be advisable to hire a professional that has experience in this area and will be able to guide you through the process.