September 23, 2013

A Life Settlement for Financial Security

A life settlement involves the sale of a life insurance policy by the policy owner to a buyer on the secondary market. Often times seniors make the decision to sell their life insurance policy because they believe they no longer need the policy and/or they no longer can afford the policy. But then the decision as to what to do so they can get the best return on all of those premiums they paid.

If you are considering a life settlement there’s several steps. First, one must identify a prospective buyer for one’s policy. Usually, during this step one develops a relationship with a life settlement broker. The life settlement broker, in turn, shares information about the life insurance policy and the insured person’s age and life expectancy in order to solicit an offer by one or more life settlement companies. The best part is that a bidding war can ensue.

Second, the life insurance owner either accepts or rejects the purchase offer from the life settlement company. If the owner rejects the offer, they keep ownership of the policy. If the owner accepts the offer, they receive a lump sum payment from the new owner, in exchange for the transfer of policy ownership and rights.

The amount of this lump sum payment is based on several factors including the buyer’s perceived value of the policy and the life expectancy of the insured. It’s your right to manage your policy as the policy owner. But if you decide to sell, the new owner’s decision about how best to manage the policy once it is their property, does not affect the value of the policy so far as the price you receive at the time you sell this policy. Once you are paid for the life insurance policy, the life settlement company is the new policy owner. Since this policy is, now, their property and their responsibility, the new owner will decide who benefits from the terms of the policy. But the best part is, you are no longer responsible for another premiums payment.