Life insurance is essential if you are worried about your dependents and loved ones in the event of your untimely death. However, people’s circumstances change over time, and you may find that a policy taken out years ago no longer suits your needs. If your spouse has already passed or if your children are now financially independent, you may feel that you no longer need coverage.
You could simply ask your provider to cancel your plan. However, canceling your plan can feel like throwing money down the drain. After paying into insurance your whole life, you may still wish to receive some sort of payout. In this case, there is an option available that allows you to cancel your policy and still receive a payment. This is called a life settlement and we’re going to take a look at what this means in a little more detail.
What is a life settlement?
The term refers to the sale of a life insurance policy to a third-party buyer. Upon the sale, the original policyholder receives a lump sum of cash and once he/she dies, the buyer receives the payment.
Am I right for this?
Many can benefit of a life settlement; however, your own personal circumstances may make it easier for you to sell your policy. The ideal candidate for a life settlement is someone who is likely to pass away soon and currently has no dependents. Young, healthy people are typically not ideal candidates for as buyers are not interested in purchasing a policy off someone who likely has many years remaining. If someone is older or terminally ill, they are likely to receive large payments, as it means the investment can pay off quickly. Furthermore, you must have the right kind of life insurance policy in order for it to be deemed an attractive investment for buyers. Also, buyers only tend to purchase policies from reputable insurance firms, to ensure that they receive their money once the original policyholder passes on. If you fit all the criteria listed above, then you would certainly be an eligible candidate.
What does the process involve?
Many people hire brokers or life settlement companies in order to facilitate the sale. However, this can be costly and can eat into any payout you may receive so it’s a good idea to evaluate different companies to find the right solution for you. If you are ready to discover your life insurance policy value, learning more about these companies and how to choose one is a must.
How much money will I receive?
The amount of money you receive from the sale can vary, as it depends on your cover and how much the buyer is willing to pay you. You will not receive the full payment as quoted to you by your insurance company. In fact, the amount you receive will probably be a lot smaller. This is why it is so important to choose the right buyer. You want to ensure that you are given a fair amount of cash upon the sale of your policy. Especially if you need the money for something specific like medical debt, paying off a mortgage, or end of life care.
