A life settlement option is a chance at instant liquidity. In a constantly fluctuating economy where most of us are having trouble making ends meet and paying off debts, a lump sum of money will definitely seem like a godsend. While it seems too good to be true that you would be given a lump sum out of thin air, selling your life insurance policy feels quite like it.
Whether or not you should sell your life insurance policy is a decision which depends entirely on your current situation. Selling off a life insurance policy has always been quite a controversial topic which is not only judged as per the financial aspects but also the moral aspects of it. A life settlement option gives seniors a chance to get instant liquidity.
How a Life Settlement Works
The way it works is that an individual who is in need of cash sells off their insurance policy to an investor who will then receive the settlement on the death of the individual. This transaction is accurately known as a viatical settlement or life settlement option. Simply having a life insurance policy however does not determine whether you will be eligible to sell off your policy. Since investors are looking for profits and not your health, they take calculated risks. This means that they are more likely to purchase policies from individuals in their 70s or those with severe illnesses. This cold behavior is exactly what raises so many objections against this money making method.
A life settlement can take 2 to 4 months to complete. So make sure you give yourself time.
Reasons for Selling a Life Insurance Policy?
An individual may sell off their life insurance policy for multiple reasons. This may be because they no longer require the coverage or can’t make the payment anymore. Additionally, they may be in need of additional finances to take care of other expenses that they’re faced with. The life policy could also just be outdated or under preforming.
Previously if you were no longer able to pay your life insurance policy premiums then you would be faced with two options. They could either let the insurance policy lapse on its own or receive a settlement for the cash value of the policy. The third option with the arrival of investors however seemed much more appealing to individuals who were stuck in a tight space.
Should You Sell your Life Insurance Policy?
For many in desperate need of cash, selling off a life insurance policy seems like a great way out of distress. Experts however say that although it solves quite a few problems, you should sell the policy as a last resort. This is because apart from the moral issues, the industry itself is fraught with unethical behavior and fraud. This is why it is extremely necessary to get in touch with a reliable broker. Most investors work through brokers who purchase the policies on their behalf. To get in touch with a reliable broker, ask a financial advisor with experience in insurance products. Brokers may either ask for payment based on the cash settlement that you receive or on the amount of settlement after death. Make sure to opt for a broker whose commission is based on the settlement. This is usually a percentage of the amount that you’ve received.
Think it Through
Selling a life insurance policy shouldn’t be a decision made on a whim. You need to consider all aspects of the situation before coming to any conclusions. A policy would be extremely helpful to those who stand to inherit from you and may even help you at the time of retirement. Evaluate the current need for money in light of future requirements in order to reach a decision.
Remember a life settlement option can give you instant liquidity and can typically get you more money than just cashing in your life policy or letting it lapse. It important that you weigh both options before you ever just cash in a life insurance policy.