With today’s still volatile stock market, many investors are leery about losing additional funds that are earmarked for retirement. This is especially the case for those who need their money now for current income or other pressing needs.
Although the market may eventually come back to its previous highs, many people who are retired or nearing retirement simply don’t have the time to recoup lost assets – leaving them with a financial gap. In these cases, a life insurance settlement could offer a good opportunity to make up for some or all of their lost funds.
What are Life Insurance Settlements?
A life insurance settlement refers to the sale of an unneeded life insurance policy. In these types of transactions, a qualifying policy holder is given a lump sum of cash in return for transferring the ownership rights of their life insurance proceeds to a third party.
This shouldn’t be confused with simply cancelling and cashing out of the policy. Rather, the sum that is received by the policy holder is typically calculated as a percentage of the policy’s death benefit – netting them, in most cases, a much higher amount than the cash value within the policy itself.
How Do Life Insurance Settlements Work?
In a life settlement transaction, a third party buyer will essentially become the new beneficiary of the policy and will also continue making the premium payments. At the time that the insured passes away, the purchaser of the policy will receive the death benefit proceeds.
In most instances, the seller of the life insurance policy must be at least 65 years of age, and buyers usually require a minimum face amount on the policy. Typically, the insured must also have some type of adverse health condition, as well as meet certain projected life expectancy requirements. With this in mind, a life settlement may be a great alternative to purchasing long-term care insurance should a health issue preclude you from obtaining that type of coverage.
Advantages of Selling Your Life Insurance Policy
There are a variety of reasons why selling your life insurance policy may make sense – especially if you no longer need the coverage. First, it is likely that you will reap a higher benefit through a life settlement transaction that you would by simply cashing out of the policy by cancelling it.
Other reasons to consider a life settlement may include:
- Funds are needed for medical expenses
- The beneficiary of the policy no longer needs the funds that the coverage provided
- Retirement assets have been lost due to a market downturn and the funds need to be replaced
- A key person in a business has retired or left the company and funds are needed to cover the company’s overhead while a replacement is being sought.
Companies like Harvest Asset Conversion Solutions are helping seniors to get out from under high premium payments from unneeded life insurance coverage, which can in turn, unlock hidden cash – in some cases, a great deal of funds that can be used for other purposes such as paying off a mortgage, taking a vacation, or even purchasing a second home.
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