Nine Reasons to Consider a Life Settlement in 2020
The right life insurance policy can be an important safety net at the time it is purchased, and the injured can live for many years knowing that loved ones will be taken care of if something unforeseen happens. But such policies can outlive their usefulness, and many people fail to realize that a life insurance policy is an asset that can be sold for cash. There are a host of different reasons why someone might opt to sell a policy for a payout through a life settlement, and any of these situations is reason enough to look into the eligibility requirements of a possible settlement.
The reasons to pursue a life settlement include:
What you will learn:
With every aspect of retirement becoming more expensive, life insurance premiums are also subject for an increase when the need for the policy has diminished. The Wall Street Journal reported a trend of major insurers boosting premium rates by as much as 200 percent. A life settlement can be a win-win in that situation, providing extra cash in the sale and removing a monthly expense from the seller.
Replacing Lost Income
Despite their best efforts during their working years, many seniors find themselves unable to fund even basic expenses during retirement. A U.S. News and World Report study found that the average retiree spends more than $14,000 a year on housing and its associated costs, and a CNN Money article estimates that the average 65-year-old man will spend $189,687 on healthcare in retirement, while an average 65-year-old woman will spend $214,565. With financial hurdles like these to clear, seniors should explore every option, and a life settlement can be the route to replacing income lost to retirement and paying unexpected expenses.
Improve Your Retirement Lifestyle
Necessary expenses like healthcare and house are one thing, but retirees also value having enough income to enjoy their golden years after a lifetime of employment. Travel, the arts, service and charitable opportunities and family enrichment are all opportunities seniors may want to embrace, but they need the money to fund these pursuits. One key reason to pursue a life settlement is the fact that i t could yield enough cash to help make a retirement dream a reality.
Life Settlement Useful in Divorce
There are several reasons why a life settlement could be beneficial when a couple is divorcing. For one thing, the end of the marriage is likely to eliminate the need for the life insurance policy (if the beneficiary was the estranged spouse.) Additionally, since life insurance is an asset a settlement can allow the value of the policy to be catalogued and distributed in the divorce, rather than one partner allowing a policy to lapse and failing to get any cash out of it.
Sale of a Business
Insurance policies are often employed to protect the assets within a business, as partners either take policies out naming each other as beneficiaries or a board purchases “key man insurance” on one or more of the company’s lead executives. When the business is sold, such policies can be sold as well to get the most benefit out of the company’s assets. A life settlement is can also be used when the business is still operating, but the person on whom the policy was taken out has retired or left for another job.
Term Policy Coverage Ending
Term life insurance is the best choice for some younger consumers; it’s more affordable and quicker to pay out than most policies that carry cash value. But if a term policy is allowed to lapse, its owner might receive little or nothing in exchange for years of premiums. A term policy can be sold in a settlement, as long as it converted to a whole or universal policy before the policy lapses or the conversion rider expires. When an individual realizes that a term policy nears its final conversion date, it maybe a prudent time to pursue a life settlement. Every day seniors lose potential funds because they let policies lapse when they could have turned them into cash.
Estate Taxes are Rarer than Ever
Those who think they might have to pony up for estate taxes later in life sometimes take out life insurance policies to help prepare for that future burden, but the decreasing likelihood of estate taxes means that such policies could be more profitable if sold in a life settlement. According to the Joint Committee on Taxation, 99.8 percent of estates owe no estate tax at all, and a provision in the Tax Cuts and Job Act, doubling the estate tax exemption to $11.2 million per individual and $22.4 million per couple, makes a safety net for estate taxes even less necessary.
Settlement Proceeds to Pay Debt
Senior Americans who are still carrying debt from credit cards, mortgages or other loans know that they don’t want debt weighing down their retirement years, and they certainly don’t want their loved ones to inherit a burden. Because a life settlement may result in a payment in excess of the policy’s cash surrender value, an unwanted insurance policy can be converted into a helpful fund to combat debt.
Rising Health Care Costs
With medical bills and long-term care costing seniors more every year, life settlements are becoming a popular option to help mitigate those expenses. Health situations during retirement are impossible to predict, so individuals may want to create health care funds to pay medical costs as they crop up.
Many seniors might have yet to learn the details about the life settlement eligibility and sale process, but the information is readily available. Life settlements can be the right solution for a number of retirement situations, and an excellent first step is entering your information into our handy Life Settlement Calculator or scheduling a call with a Magna Life Settlement specialist today.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relief on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transactions.