A Life Settlement is a transaction in which a policyholder, under the guidance of a financial advisor and/or insurance agent, possessing an unneeded or unwanted life insurance policy sells the policy to a third party for more than the cash value offered by the life insurance company. The purchaser becomes the new beneficiary of the policy and is responsible for all subsequent premium payments.
Life Settlements are an important development in that they have opened a secondary market for life insurance in which policy owners have a real solution in the event that they need to exit a life insurance arrangement.
Increasingly, consumers no longer need their life insurance policies due to a multitude of reasons. Unfortunately, the life insurance companies often don’t offer all the options available for consumers in these situations.
Some of the options given to consumers from insurance carriers include: surrender, lapse, 1035 Exchange, a reduction in face value, among others. The option to surrender a life insurance policy entitles a policyholder a mere fraction of the policy’s death benefit. Often, policyholders let policies lapse, in which case they receive nothing for their years of premium payments.
Many state laws require that consumers be informed about Life Settlement Solutions.
A Life Settlement solution many times provides policy owner’s immediate cash that can be significantly greater than the cash surrender value. This immediate access to capital can be used to react to many different types of life changing events such as:
- The inability to afford premium payments
- No longer have the need to provide for dependents
- The inability to pay debt
- The death of a spouse
- A change in health
- Underperformance of insurance policy
Life Settlements represent an important solution for a growing number of people who may have thought that they had no options at all. Rather than continuing to pay premiums on a policy that no longer serves its original purpose, Life Settlements offer consumers payoffs that can be significantly greater than surrendering a policy. Life Settlements offer a reasonable and profitable exit strategy that addresses the financial objectives of policyholders.
Introduction to Life Settlements