Life settlements can be a feasible option for seniors willing to exchange their life insurance policy for contiguous cash. A life settlement is the sale of an existent life insurance policy for a lump sum of money of money. It allows policyholders to access the just market value of their life insurance by merchandising their policies and receiving payments greater than the cash resignation value.

Technically, a life settlement contract allows you to sell your insurance policy to a 3rd political party in exchange for a reduced amount of the human face value. This is possible because a life insurance policy is actually property, like a car, house, pillory and chemical bonds that tin be legally sold. A life settlement essentially allows you extract value today from an plus that is generally thought to only have got a benefit when you die. Typically, life settlement transactions affect life insurance policies of a large human human face amount; “key-person” coverage or corporate-owned life insurance; or policies representing extra coverage that is no longer needed.

Here’s how a life settlement works: When a life settlement company purchases your life insurance policy, it pays you a percentage of the policy's face value. Then the life settlement company goes the new donee of the policy at maturation. As such, it is responsible for all paying all hereafter insurance premiums and accumulates the full death benefit when the insured dies.

A Growing Industry

With a life settlement, you can have a large sum of money of cash in exchange for your insurance policy while you’re still alive. This eliminates insurance premium payments, accommodates the changing needs of your dependants and supplies greater financial flexibility.

Life settlements can also be used for charitable giving. Complex estate and tax planning strategies can apply when using life settlements in a planned giving program. But here’s how this plant in simplest terms: You donate your life insurance policy to a charitable organization, which immediately sells the policy for a lump sum of money of cash via a life settlement.

These and other benefits are making life settlements an attractive option for seniors with unwanted/unneeded insurance policies. Consequently, the life settlement industry have seen important growing in recent years. A survey by Conning & Co. Research establish that senior citizens owned approximately $500 billion worth of life insurance in 2003, of which $100 billion was owned by seniors eligible for life settlements. Since 2003, more than than and more of these eligible senior clients have got sold their policies and helped the market increase.

Separate research by the University of Pennysylvania’s business school establish that life settlement suppliers paid approximately $340 million to consumers for their underperforming life insurance policies, an chance that was not available to them just a few old age before. "We gauge that life settlements, alone, generate surplus benefits in extra of $240 million annually for life insurance policyholders who have got got exercised their option to sell their policies at a competitory rate," according to the research.

Selling Your Policy

You could be a premier campaigner if you are of retirement age, have paid off your mortgage and other debts, and no longer necessitate the financial protection of life insurance. The amount you have got got will depend on your age, health, death benefit, and the number of old age your policy have been in force.

Seniors with the top opportunity of merchandising their policies are those that are aged than 65 old age of age, have a deliberate life anticipation of more than than two old age (but less than 10 years) and may have experienced a wellness change that have led to their insurance insurance premiums increasing. Depending on the policy holder’s life expectancy, just about any type of policy can be sold, including universal life, whole life and exchangeable term contracts. However, policies generally must be valued at least $100,000.

Determining whether to sell your life insurance policy is a purely personal decision. You might see a life settlement under the following circumstances:

• Your employment status have changed.

• You need further finances to pay medical/long-term care expenses.

• Your insurance insurance premiums are too expensive and you can no longer afford them.

• You would wish to implement a charitable or household gifting plan.

• You are facing bankruptcy.

Consulting with an Advisor

Before you make up one's mind to sell your insurance policy, you should analyze all the available options, counsels the American Council of Life Insurers, a American Capital D.C.- based trade group. And instead of going it alone, confer with with a financial advisor who is familiar with life settlements. This could include account/CPA, lawyer (especially older law attorney), financial/estate planner, certified senior advisor or charitable trust officers.

Additionally, you might see working with a broker—although your financial advisor can submit your lawsuit to the life settlement company directly. However, in an industry where market value for life insurance policies may be unfamiliar, brokers typically make the best occupation of getting just market value for policies. They submit life settlement cases and commands to multiple companies, which can ease dialogues between high bidders.

Keep in head that life settlement companies are essentially investors that monetary fund many transactions each year. They throw purchased policies as portfolio assets, rather than making them available to outside investors. They also have got in-house compliance sections to carefully reexamine transactions, and they are backed by institutional finances from a major bank.

Steps to Life Settlement Transactions

Wondering what haps during life settlement transactions? Here are the stairway involved in the typical transaction:

• Step 1: You confer with with an advisor and make up one's mind to sell your policy.

• Step 2: You and your advisor choice a broker.

• Step 3: The broker submits your lawsuit (and you supply a release for your medical information) to assorted companies.

• Step 4: If your policy is eligible for a life settlement, suppliers direct offers to the broker.

• Step 5: You accept an offer and then complete the company’s shutting package.

• Step 6: The life settlement company topographic points a cash payment in escrow and submits change of ownership word forms to the insurance carrier.

• Step 7: Once the paperwork is verified, the finances are transferred to you.