Life Settlement Fraud: Avoid Being A Victim
A life settlement is defined as a transaction in which the owner of a life insurance policy sells the policy to a third party in exchange for a cash payment. According to Study.com, the amount a policyholder can receive from selling a policy will likely fall somewhere between its cash surrender value and the death benefit.
More often than not, the people who purchase life insurance policies are institutional investors. They’re interested in investing in life settlements because they represent an alternative investment opportunity not linked to the stock market. In addition to the lump sum payment made at the time of the settlement, the investor will also need to pay the premiums as long as the insured individual under the life insurance policy lives.
Why People Sell Their Life Insurance For A Life Settlement
For the seller of the policy, the benefits are pretty clear. The seller will receive money that can then be spent on anything. Policy owners who sell their life insurance policy can use that money to pay for whatever they’d like, including long-term care, improving their retirement lifestyle or gifts to family or charity. Sellers still benefit from their policy, but they are doing so while they are still alive.
The buyers of the policy will be entitled to the death benefits of the life insurance policy once the insured passes away. The idea is that the death benefits will be greater than the combined cost of the payment to the original policyholder and the ongoing premiums. The buyer can turn a profit in that scenario.
To further simplify things, the original policyholder is basically trading long-term benefits for short-term gain, while the buyer is investing in the present to gain a larger payout in the future.
Unfortunately, and as is the case with many financial transactions, there are also malicious individuals who seek to gain unfair advantages in these deals. Those bad actors are the causes of life settlement fraud.
What Policy Owners Need to Watch Out for
If you or someone you know is considering selling a life insurance policy, there are few key things to understand.
First, no buyer should pressure you into a deal. Life settlements are regulated in forty-three states and take time, so make sure that the provider you choose is licensed to do business in your state. Magna Life Settlements is licensed in every state that requires licensing and is able to do business in all 50 states.
You should also continue to protect your personal information, even after selling the policy. It is possible to ask the purchaser which other parties have access to your information. You can request a statement detailing the parties who can view your personal information, so know that you are able to take additional measures to further protect yourself as needed.
Life settlements have the potential to be beneficial for all parties, but they also can potentially attract dishonest parties looking to take advantage of seniors. Ask as many questions as you need to before making any deal, and if you think that something is wrong, seek advice from the Life Insurance Settlement Association or your state’s Department of Insurance.
Magna Life Settlements is here to help – please contact us today or get started with our Life Settlement Calculator to see if your are eligible for a life settlement.
*Comments provided in this post are for informational purposes only and should not be construed as financial, legal or tax advice, recommendations or solicitations. Please consult your financial, legal or tax professional with questions related to the information presented, or for advice as to whether a life settlement is right for you.