Jun
24
What is a life settlement for a life insurance policy?
Posted by harry Comments (9)
Donald asked:
My parents are in their eighties, and I was told that they could sell their life insurance policies via something called a “life settlement.” Could anyone fill me in on what that is, without trying to solicit my business? Thank you.
My parents are in their eighties, and I was told that they could sell their life insurance policies via something called a “life settlement.” Could anyone fill me in on what that is, without trying to solicit my business? Thank you.
Categories: Life Insurance
There are buyers galore – Your parents turn in their life insurance policies which pay upon death, and get a percentage of the value right now and when they die, the company that buys their “life settlement” gets the whole amount. Its a way for people to cash in their policies for ready money, rather than letting the named beneficiaries collect upon death. Your parents would only get about 25% of the total value of their policies, and you’d be out! They should perhaps check into “borrowing some money on their life insurance policies” from the Insurance company, benefits are paid upon death, but less the borrowed amount. Google “Life Settlement companies” for websites. Read their proposals very carefully.
Can you SELL? 95% of new agents wash out, because they can’t round up the customers, and/ore close the deals. It’s not easy, and business doesn’t come to you.
Farmers is a solid company, and offers as much support as any of them do. The issue is, are you cut out to be an insurance salesperson.
Do not let them do that. It is a big ripoff. They will get very little and the beneficiaries get nothing because the policy was sold.
If they need money ask about withdrawing dividends or taking a loan against the policy. I would strongly advise against a life settlement.
It’s called a viatical. The buyer cashes in big, but takes the tax hit. Not sure why they’re considering it, but if it’s for health reasons and a terminal condition look into an Accelerated Death benefit that would be a rider on the policy.
Viatical settlements are tax-free if the life expectancy is less than two years. Moreover, the 25% number suggested by another answer is the absolute MINIMUM they’d be offered.
The first step is to call the insurance company to see what kind of options they have to pull money out of the policy on their own.
Usually you’d consider it if you’re terminally ill. If you’re slated to pass away in 12 months they may give you 60% of the death benefit now and they get 100% after they pass. You get the money now and they take the risk that you don’t die in a timely fashion. If you’re considering it then you’d get the most bang for your buck doing it directly with the insurance company.
If they’re not ill then most companies wouldn’t be interested because they could live another 20 years. Or, the payout would be very little.
You can easily check life insurance quotes in internet, for example here – lifeinsurance.awardspace.info
Life Insurance – Top Ten Questions
Life Settlements
A life settlement is the sale, assignment, transfer, or bequest of the death benefit or ownership of a life insurance policy by the owner of the policy where the insured does NOT have a catastrophic or life-threatening illness or condition. Typically, the owner of the policy receives cash (generally an amount greater than the cash surrender value in the policy, but less than the full amount of the death benefit); and the life settlement company becomes the new owner and beneficiary of the policy and is responsible for the payment of all future premiums. Upon the death of the insured, the death benefit is paid to the life settlement company. Life settlements usually involve the sale of life insurance policies by owners where the insured is a senior citizen or where the insured may have a medical condition that will likely result in a shortened life expectancy.
The following questions relate to life settlements:
1. How does a life settlement differ from a viatical settlement?A viatical settlement is the sale, assignment, transfer, or bequest of the death benefit or the ownership of a life insurance policy by the owner of the policy to a viatical settlement company where the insured has a catastrophic or life-threatening illness or condition. Typically, the owner of the policy receives cash from the viatical settlement company; and the viatical settlement company becomes the new owner and beneficiary of the policy and is responsible for payment of future premiums. Upon the death of the insured, the death benefit is paid to the viatical settlement company. In order to enter into a viatical settlement transaction the insured must have a catastrophic or life-threatening illness or condition. Such illness or condition is not required for entering into a life settlement.
It is a way in which they get some money before their death and the main thing is that you are not going to get that after their death.some companies buy them and give them some them money for that.