In many circumstances, a life insurance policy is an important investment that can benefit those left behind when a loved one dies. Many financial advocates would recommend life insurance to a client, but those same advisors understand that the efficacy of life insurance often runs its course. What alternatives exist for older policy holders who are still paying premiums despite the fact that their needs have changed and they don’t really need the policy anymore? It is possible that those individuals can sell their life insurance policy for cash value through a life settlement, in which a third party buys an unwanted insurance policy in exchange for cash. Here are some facts about the life settlement option:
The History Behind The Life Settlement Industry
The origin of life settlements dates all the way back to a 1911 Supreme Court case called Grigsby v. Russell. In the 1980s sellling an unneeded life insurance policy for cash became a way for people with diminished health to obtain funds for medical and living expenses. In the years since, legislation and tax laws have created a more favorable climate for consumers looking for options when an insurance policy is no longer needed. Statutes passed in the last five years now mean that 90 percent of Americans are protected by comprehensive life settlement legislation.
What Are The Benefits Of Selling My Life Insurance Policy?
The retirement years are costlier than ever, both because of the rising price of health care and the uncertainty of government resources like social security. A life insurance policy is an asset that can outlive its usefulness; the original beneficiary might not need the proceeds anymore, or the premiums have become burdensome. Under these circumstances, it is worthwhile for a senior to explore an option that can free up cash in the sale of that unwanted policy. Besides the obvious cash windfall, a life settlement also eliminates the premium payments that have depleted even more of a retiree’s limited resources.
Do I Qualify?
Two key variables dictate whether an individual would benefit from a life settlement: the policy holder’s level of health impairment and the cost structure of the policy. The two factors are related, where a policy issued with a higher rating combined with a poor health prognosis can result in a promising settlement offer. For example, if a universal life policy was issued at preferred-plus and the policy holder becomes significantly more impaired than predicted, a life settlement would provide a payout higher than the stated cash surrender value. Some policies are not a good fit for a settlement, and the owner may be better off to either surrender their life insurance policy for cash value, borrow against the policy’s value, or negotiate another option with their carrier. To find out whether a life settlement might be a good fit for you, visit Magna Life Settlement’s simple calculator.
What Are The Steps To Sell My Life Insurance Policy?
Because a life settlement can provide a significant cash payout to help pay for retirement expenses, no one should miss that opportunity simply because they don’t understand the life settlement process. As the word gets out about the potential upside of life settlements, seniors who are likely to benefit from these transactions need guidance about how it works and how to start the process. Here are the basic steps of a life settlement:
1. Determine your eligibility. Using Magna’s calculator, first determine whether your medical status and the specifics of your policy make you a good fit for a settlement.
2. Submit an in-force illustration. With the help of a Magna case administrator, you will request an illustration from your life insurance carrier that spells out what the minimum premium costs would be if you kept the policy until it matures – typically at age 100 – and if the net policy account value at maturity was $1,000. This allows us at Magna to determine how much your policy may be worth.
3. Submit additional healthcare data. At this point, you will fill out a HIPAA form protecting your privacy and submit your health data. This also helps us to determine how much your policy may be worth.
5. Wait for Magna review and informal offer. Then, your Magna representative will calculate the value of your policy and decide whether or not to make you an informal offer, pending the next steps of information gathering.
6. Magna obtains medical records and life expectancy report. These reports verify your policy value so that Magna can calculate an offer that pays out the maximum amount for your policy.
7. If your policy qualifies, Magna extends a formal offer. If you accept the offer, you will receive cash in exchange for the sale of your policy after the sale is complete. This closing process takes some time. Similar to buying a house, a life settlement involves signing contracts.
8. Magna takes over the policy. After the settlement transaction closes, Magna is responsible for paying all future premiums and receives the death benefit once the policy matures.
If you are interested in receiving a personalized life settlement estimate or have questions about the process, contact a Magna representative today.
*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.
May 09, 2019Magna Life Settlements
Sell a Life Insurance Policy For Cash?
With the promise of the insurer passing over a pre-determined amount of cash to your beneficiaries upon your demise, you are expected to pay monthly or quarterly premiums to the insurer. But what happens when you are unable to pay or feel like you don’t want to continue with the life insurance policy? Can you sell life insurance policy to a third party and how much can you expect as the settlement? Most importantly, when is the best time to sell the policy to a third party?
So the question is can you sell your Life Insurance Policy?
It is within your rights to sell a life insurancepolicy that you no longer need to a third party under the life settlement clause. Ideally, the sale involves transferring your claim over the expected payout to a third party investor in exchange for cash. In effect, the investor offers immediate cash payment (also known as a buyout) and continues paying the premiums up to the time of your passing when they can then claim the full settlement from the insurer. Life Settlement companies like Magna, help you sell your life insurance policy form the comfort of your own home, or over the phone.
How much cash can you expect from the sale?
How much you receive from the life insurance sale depends on a host of factors set out by the third party investor. In most cases, the investor considers such factors as the value of the policy, your current health condition, and age.
The average settlement ranges from 20 to 25 percent of the value of your policy. The subject is nonetheless open to negotiations, and this has seen the settlement value shoot to as high as 50 percent of the policy size. You should, however, note that not every subscribed life insurance qualifies for settlement.
Eligibility for life insurance policy sale
Almost every third-party life insurance investor has eligibility criteria that they use to screen individuals seeking to sell their life insurance. Nonetheless, some of the standard procedures followed by most investors include the fact that you must be above 70 years of age and have a policy value of more than $50 thousand. Most companies also prefer universal, whole, and convertible term life policies.
The regulations are, however, not set in stone. Plus, the stiff competition has forced some companies to accept policies for individuals aged 65 years. Most investors will also overlook the age limit, especially if the insured is terminally ill with a life expectancy of less than two years.
When does settling a life insurance policy make sense?
Non-payments of premiums
Insurance companies may decline to honor a life insurance claim if you stopped or have been inconsistent with paying premiums. Therefore, in the event financial constraints make it impossible to honor the regular premiums, remember that you have the option to sell the policy in a life settlement rather than allowing the insurance company keep the money.
Medical expenses and emergencies
When pressed by large medical expenses that need to be paid up front, you can always count on the proceeds of the settlement. Though saddening, health complications may in actual sense raise the settlement value of the policy where the investors project a lower life expectancy.
How to maximize the settlement amounts that get to your bank
Life policy settlement is taxable under income and capital gains. With the government taxing the settlement, the last thing you need is a broker or insurance agent seeking to dig further into the little left. Maximize the amount of the settlement that gets to your bank account by working with inexpensive agencies, and, if possible, reach out to the investor directly.
Contact Magna Life Settlements to get a free estimate on how much cash you can get from your life insurance policy!
May 07, 2019Bethany Bradsher
Questions to Ask Yourself Before Lapsing Your Policy
For a host of reasons, insurance policies that seemed like a good idea during an individual’s middle-aged years can become a burden as that person ages. There are undoubtedly good reasons for a policyholder to shed such an unwanted policy, but what many people don’t understand is that there are other options to lapsing a policy.
If premiums have become unwieldy, or the original beneficiary of the policy no longer needs the funds because of altered circumstances, the first reaction is often to let the policy lapse. What does lapsation entail, and why should seniors consider alternatives that could result in a better financial result? Here are three key questions policyholders who are considering doing away with their life insurance policies should ask themselves:
1. Do You Need The Policy?
The first step, for an individual considering getting rid of an insurance policy, is to consider the cost and future benefit and make a thorough determination of whether that policy is still necessary. Significant changes in income or family structure, in particular, may diminish the efficacy of a policy, especially if the intended beneficiary no longer needs the payout.
2. How Are The Premiums Affecting You?
For seniors, particularly those on fixed incomes with rising health care costs, continuing to budget for insurance premiums might not be the best use of limited resources. Additionally, depending on the structure of the policy premiums can get more expensive as the years go on. Seniors who are discouraged by this burden are often tempted to just stop paying and let the policy lapse rather than considering a more profitable alternative.
3. What Are My Other Options?
Even if policy holders are convinced that they would be better off without a particular insurance policy, they could explore the option to sell their policy before letting it lapse. Lapsation removes the premium burden, but it doesn’t compensate the individual for the money paid out in premiums over the years. Rather than let a policy lapse, more and more seniors are investigating life settlements, which allow for the sale of a policy for cash. Not everyone qualifies for a life settlement, but for those who do qualify, it provides a way of unloading a policy that has become a liability. Find out if you can turn your life insurance policy into asset today by scheduling a call with a Magna life settlement specialist or trying our simple life settlement calculator.
*Comments provided in this blog 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.
March 24, 2019Bethany Bradsher
When Families Change, Life Insurance Needs Can Change Too
When someone takes out a life insurance policy in their ‘30s, ‘40s or ‘50s, that purchase is predicated on assumptions about the future of the policyholder’s family. But unexpected changes to the family structure can occur over the years, and for seniors those changes might lead to the consideration of a life settlement.
Insurance For Your Family: What You Must Know
The most common family change, with obvious insurance ramifications, is divorce. Often a person buys life insurance, names their spouse as a beneficiary and later gets divorced, voiding the need for a policy that will support the surviving spouse. If the policyholder is over 65 and paying into premiums unnecessarily, a life settlement can turn that situation around and provide a windfall rather than burdensome expenses.
In the same way, a senior who undergoes a divorce and then gets remarried later in life may want to schedule a life insurance check with their broker to guarantee that the coverage serves the needs of the policy owner and his or her new spouse. A new policy with a new beneficiary might not be practical or affordable if the remarriage happens late in life, but that new family could be eligible for a cash windfall through a life settlement that they can enjoy in their retirement years.
Insurance Policy Review
If an insurance policy is structured to benefit children or grandchildren, the addition of family members through birth or adoption could prompt an insurance re-evaluation. Some policyholders, particularly seniors, opt to sell their policies and use the proceeds for college funds or other legacy investments rather than an insurance policy that will pay out after their death. Seniors who create educational funds for their grandchildren can have the benefit of watching those young people take advantage of higher education and make steps toward building their futures.
Life Events Lead to New Insurance Needs
Change is inevitable in life, and changes to families—whether welcome or unwelcome—can create new investment and insurance needs. Seniors with a thorough understanding of their financial options will provide the richest opportunities for themselves and their loved ones, and those facts are available from trusted financial advocates or specialists like the ones at Magna Life Settlements. If you have seen changes in your family and believe that a life settlement could be a better use of your resources than an unneeded life insurance policy, set up a call with a Magna advisor or try our simple life settlement calculator today.
January 31, 2019Bethany Bradsher
Insurance Overload: When Seniors Find Themselves with Too Much Insurance
It’s an idea reinforced from the very advent of adulthood: it’s better to have too much insurance than too little. But in the case of retirees, over-insurance is a very real possibility, and it’s a problem that can keep seniors from having sufficient resources for the costs of their golden years, expenses like medical bills, long-term care and travel.
What does it mean to have too much life insurance?
Sometimes middle-aged adults, unsure of their future needs and swayed by persuasive sales pitches, buy large policies, or several different policies, because of their fear of leaving their families with no means of support. Sometimes the amount of coverage makes sense at the time of purchase, but as the years go by circumstances change and that level of insurance is no longer needed.
Maybe your original beneficiaries no longer need the financial support they once needed in your younger years, or your family dynamics have changed. Many seniors find that they are paying prohibitive premiums, giving money they need for daily expenses to an insurance policy that isn’t actually serving them anymore. And when they are over-insured, they may come to the realization that while they still need some life insurance, they don’t need as much as they have been carrying. Even if beneficiaries might still need a payout when the policyholder dies, an overly large policy might give them more than they actually need.
Above all, seniors need to make sure that they haven’t invested in life insurance to the detriment of their own livelihoods. As one insurance blogger stated, “We all need to make provisions for our loved ones in the event of our death, but that should never be at the expense of providing for our lives. Statistically, you’re much more likely to live out your full life than to die prematurely. You will also need to provide for that!”
If you suspect you might be over-insured, schedule an appointment with a trusted financial advisor to evaluate all of your insurance holdings and their efficacy for your situation. If you have too much insurance, the next step is to investigate the possibility of a life settlement. For those who qualify, a settlement can turn a liability—excessive insurance—into a windfall of available cash for immediate retirement needs. Magna’s life settlement advisors are available to answer questions about life settlement criteria and the steps in the process.
January 22, 2019Magna Life Settlements
How Selling Your Life Insurance Policy May Help Your Retirement
Planning for your retirement can be a daunting experience. There is so much to think about, especially the amount of money you need in order to retire comfortably. Generally, the rule of thumb is that the money you may need when you ultimately retire should fall somewhere between 70 to 85 percent of your income.
To estimate how much money you may need for your retirement years, you could estimate approximately how much you would be spending in the future. There are certain expenses you probably won’t have to worry about once you’re retired, including expenses related to your children. Your mortgage may be paid off, and you may not have to worry about commuting or other work-related expenses.
At the same time, there could be new expenses, such as healthcare costs. And you may also travel more after retirement since you will have free time that you didn’t have when you were working.
You should maximize your income flow during your working years so that you can be comfortable after you retire. Following are some of the key ways to increase your retirement income.
Retirement Calculator: How to figure out your retirement score:
Social Security Benefits
Avoid withdrawing money from your Social Security benefits until at least the retirement age of 65 or 67 if you were born in or after 1960. If you continue working until 70, you will receive an additional benefit of eight percent for each year you wait to retire after age 65.
If your employer offers company benefits, you can take advantage of them and choose those that can give you the maximum income after retirement. You can choose the right investments to reflect your age and risks in a 401k plan. Be wise about when you withdraw so that you can get the most benefit from the plan.
You can use your personal savings toward your retirement income, but the better option is to make deposits to mutual funds, which can give you considerably more money in the future as they grow.
Whole Life Insurance
If you have a whole life insurance policy, borrowing against the cash value and investing the balance can give you more income when you retire.
A reverse mortgage can benefit you if you are 62 or older. It lets you free equity in your home and ensures that you don’t have to make future payments.
Finally, another good way to ensure that you can retire comfortably is to avoid the trap of debt. Be smart when using credit cards and when taking out loans. Always pay the maximum toward your balance on both in a timely manner. Avoiding getting into debt can help you enjoy full control over your finances. You can also live stress-free when your finances are in good condition. As a result, you have a better opportunity to retire with a sense of security.
December 10, 2018Magna Life Settlements
Bill HR 7203 to Allow Life Settlements to Fund Long-Term Care
A new bill being weighed by the U.S. House of Representatives would make provision for the tax-free rollover of life settlement proceeds into tax-free accounts dedicated to long-term care. The bill, H.R. 7203, was sponsored by Rep. Kenny Marchand (R-TX) and referred to the House Ways and Means Committee on November 30.
H.R. 7203, known as the Long-Term Care Account Act, would provide a significant benefit for seniors who are facing the daunting costs of long-term care. If those individuals have a life insurance policy that is no longer serving them, the bill would permit them to easily use the money from a life settlement to fund an assisted care facility, in-home care or other treatments deemed medically necessary.
The provisions of the Long-Term Care Account Act include:
Tax-free transfer of funds
The tax-free transfer of funds from a life settlement into accounts used exclusively for long-term care expenses. That money can be used for long-term care insurance or any “qualified health expenses” that a medical practitioner would recommend to treat health impairments or maintain health for retirees.
– As long as the distributions from life settlements into the long-term care accounts are used for their stated purpose, they will be exempt from any tax. If funds are used for unauthorized purposes unrelated to long-term care, those expenditures will be subject to both income tax and a 20 percent excise tax.
– If the funds distributed to the accounts from life settlements are not spent on long-term care expenses, they can remain in the account untaxed until the death of the account holder and that person’s spouse.
H.R. 7203 is a win-win for seniors
The Long-Term Care Account Act is a win for seniors looking for new revenue sources, pairing the prime opportunity of a life settlement with the pronounced need of long-term care. Rising health care costs during retirement are one of the chief reasons people over 65 investigate life settlements, and the passage of this legislation would link the two in a way that will provide tangible benefits to Americans seeking to make the most of their retirement years.
Please don’t hesitate to urge your elected representatives to support this important bill. For more information about life settlements or the pending legislation’s, you can contact a Magna representative by scheduling a call today.
November 26, 2018Magna Life Settlements
Skyrocketing Premiums Present Challenge For Universal Life Policy Holders
Older Americans today have many excellent reasons to pursue the sale of a life insurance policy in a life settlement, but one of the most prevalent reasons is the prohibitive cost of paying premiums. And for those maintaining a universal life policy, a recent Wall Street Journal article reports that some are paying double or even triple their original premiums because of an historic drop in interest rates.
According to the piece by Leslie Scism in the September 19, 2018 Wall Street Journal, many policyholders are finding that universal life hasn’t held up well over time, especially when a decade of low interest rates have depleted the tax-deferred savings account linked to the policies. The savings accounts are designed to offset the cost of renewing the insurance each year, but as interest rates have stayed down the accounts have been insufficient to stave off skyrocketing premiums.
The article cited one case study in which a 55-year-old had purchased a $1 million policy in 1988 with an annual premium of $12,000. By the time that individual turned 80 in 2013, the savings account was gone and the premium had jumped to $50,000 a year. In another case, an 85-year-old retired teacher was paying $30,000 a year for his three universal life policies—three times the premiums when the policies were issued.
One expert on the insurance industry, John Resnick, told the Wall Street Journal that many seniors “are sitting on a ticking time bomb, and they don’t even know it.” The article goes on to say, “Universal life is among the reasons Americans are approaching retirement in the worst shape in decades.”
Those who believe they are stuck paying exorbitant premiums while also trying to fund retirement costs like healthcare and housing must be educated about options like life settlements. Rather than surrender a policy, an individual faced with prohibitive premiums might be able to sell his policy for a much higher payout.
Seniors shouldn’t let prohibitively high premiums chain them to a policy that is doing them more harm than good. Depending on the health impairments of the insured and the cost structure of the original policy, a life settlement could yield a windfall considerably higher than the surrender value. When premiums become burdensome or the purpose for originally purchasing the life insurance policy no longer exists, a life settlement can turn a liability into an instant asset.
Providers like Magna stand ready to answer any questions seniors or their advocates may have about life settlements, and they can even access our simple life settlement calculator to determine their eligibility for a sale of their policy.
November 19, 2018Magna Life Settlements
Magna Featured on Lifetime’s Designing Spaces
Designing Spaces on Lifetime Television featured Magna Life Settlements in November! During the episode, an older couple explored the process of a life settlement, the advantages of pursuing a sale of a life insurance policy and the various ways the cash from a settlement can meet the family’s needs during their retirement years. Clay Gibson, Magna’s senior vice president for origination, shared how families can benefit from life settlements.
The Joels, who were featured on the episode, are a retired couple looking to make their golden years golden. Mr. Joel started buying life insurance shortly after the couple got married, but the premiums became too expensive and he was considering either selling or surrendering the policy.
When their daughter Donna Eichner comes over to discuss the possibility, the Joels explain the possible benefits of selling a life insurance policy. Taking a life settlement would allow them to have additional funds for their retirement years. Mrs. Joel speculates on the ways they could use the extra money generated by a life settlement, including travel plans an donating to charity.
Clay Gibson explained, “Life insurance is actually property, and it’s property that can be sold. Half a million insureds are lapsing their policy every year, and that’s half a million insureds that could have come to Magna Life Settlements and received an offer above and beyond what the insurance carrier would have paid them for their policy.”
Mr. Joel enters his information into Magna’s life settlement calculator, and after viewing the results the Joels and their daughter conclude that a settlement is the wisest choice for their family. Their daughter, Donna, said, “I know myself and siblings are well taken care of, and now my parents can do what they want to do.” For the Joels, a life settlement will take an insurance policy that had become burdensome and convert it into a financial asset.
For families who, like the Joels, are seeking to make the most of their financial situation in their senior years, Magna life settlement specialists stand ready to offer information on the benefits of life settlements. Call today to consult with a Magna specialist, or visit the FAQ section of our website for more information on the particulars and process of settlements.
October 09, 2018Magna Life Settlements
How A Life Settlement Can Enable A Housing Upgrade
Housing can present a good news-bad news scenario for seniors; many have been in their homes long enough to see them paid off, but limited retirement income makes it difficult for them to keep up with home repairs. A smaller budget, paired with rising costs of healthcare and other late-in-life expenses, make it tempting for seniors to defer maintenance on their house.
Retirees might cut costs by cancelling their lawn care or pest control contract or by putting off repairs that they know need to be tackled. Whether it’s a new roof, more energy efficient windows, wood replacement or plumbing issues, it is common for homeowners over 65 to postpone necessary repairs because of financial worries. The unfortunate result is a home that is deteriorating, losing value and, in some cases, creating a hazard for the seniors living in it.
Some non-profits and ministries have organized programs to provide free home maintenance for seniors, and those groups can be a godsend. But because upkeep of a house is an ongoing task, most seniors need more than occasional nonprofit help to keep an older home in good condition. In many cases, seniors are realizing that a smaller, less time-consuming house would suit their stage of life better, but they don’t have the funds to even think about a move.
A life settlement can be the answer to this housing dilemma. Like an old house, an old life insurance policy can outlive its necessity and actually become a burden. In many cases, that policy can be sold to create an extra source of income, and the cash obtained from the settlement can make a way for seniors to transition to a more favorable living situation.
The profits from a life settlement might be the boost a senior needs to move into a new home, possibly a townhome, a house in a gated neighborhood or an apartment in a retirement community. There are options for seniors that take away many of the standard maintenance concerns and allow individuals over 65 to enjoy their golden years with much less stress over house issues.
Some seniors might not want to move, but a life settlement could provide them with enough money to complete all of those repairs that they have been putting away for years. The end result could be a more efficient, pleasant and attractive version of the home they have loved for years—a place to continue making memories with family or friends. In either case, a life settlement may be the key to unlocking either a new or remodeled home. To find out if you might qualify for a settlement, use Magna’s handy life settlement calculator.
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