Are Life Settlement Right for You?

Your life insurance is a financial asset that belongs to you just like your real estate, personal property, retirement accounts, and bank accounts. Like your other financial assets, it can be sold to another party.  
In a life settlement, the investor agrees to pay the policyholder a fee. They become the beneficiary of the policy, and when the insured person dies, the investor receives the face value of the policy.  ​

The benefit to the policyholder is that they no longer have to pay premiums to keep the policy in force. Instead of surrendering the policy back to the insurance company and receiving nothing, or turning it in for its cash value, the policyholder gets a lump sum of money to do with as they please.  
-
Here’s what you need to know about life settlements to understand if selling your life insurance policy may be the right move for you: 

Do you meet the basic eligibility requirements?  

Most life settlement participants are over the age of 65 and have a permanent life insurance policy with a face value of more than $100,000. People who are younger but have a terminal illness with a diagnosis of fewer than 24 months to live may be able to sell their life insurance policy through a viatical settlement.  
You need to initiate your life insurance policy more than two years before you can transfer ownership to another party.  
-
If you have a term life policy, it may be possible to convert it to a permanent policy and then sell it through a life settlement. A life settlement broker can help you determine if converting your policy is an option.  
Do you need the benefit that the life insurance policy provides upon your death? 
-
Many seniors find that after their children are grown and self-sufficient, they no longer need to maintain a life insurance policy with a large benefit amount. In this case, the policy premium may seem like a pointless financial burden.  
-
If you don’t need to leave money to heirs, and you aren’t interested in the option to take out a loan against your cash value life insurance policy, you can exchange those benefits for cash through the life settlement process.  
-
Have your life insurance premiums become unaffordable? 

The rising cost of healthcare causes financial hardship for many people near and past retirement age. Selling a life insurance policy can help stabilize a financial situation in two ways. It eliminates an expensive premium and it provides a much-needed infusion of cash.  
-
Are you looking for ways to add to your retirement nest egg?  

For some people, selling their unwanted or unneeded life insurance policy is a great way to add financial security to their retirement. There may be a benefit to taking cash now and removing the expense of an ongoing life insurance premium from the budget.  
-
If you decide to participate in a life settlement, you can expect to receive more than the policy’s cash surrender value, and less than its face value. This may represent a significant amount of money. 
-
As life expectancies increase, seniors in relatively good health may wonder how they’ll fund a retirement that could last 30 years. It can be difficult to plan for financial stability when you need to make your savings last three decades.  
-
A recent survey indicates that older Americans are generally more concerned about running out of money than they are about dying. In fact, 33% of Americans currently haven’t saved anything for retirement. Only 31% of seniors have more than $10,000 in savings for retirement.  
-
Those nearing retirement who aren’t comfortable with the amount of money they’ve saved many not feel like there are many options. Not having to depend on Social Security for 100% of income in retirement is a major concern, and selling a life insurance policy through the life settlement process is one way to help add some bulk to retirement savings.  
-
Have you researched the life settlement process?  

The best way to find out if a life settlement is a good option is to learn as much about the process as possible. There are many reliable sources of information available.  
-
The Life Insurance Settlement Association (LISA) is an organization that sets standards for life insurance investors and brokers. Their goal is to educate consumers on the regulations and advantages of participating in a life settlement, as opposed to surrendering a life insurance policy and receiving nothing for it.  
-
People interested in learning about life settlements should research their state’s laws about the process, as they vary widely depending on where you live.  
-
Whether you ultimately choose to sell your life insurance policy through a life settlement or keep the policy in force, it’s crucial to understand your options. Seniors give up $112 billion in benefits each year when they choose to surrender their life insurance policies or let them lapse. The policies are then terminated, and the insurance company keeps all of the premiums paid over the years.  
-
Of that $112 billion in potential benefits that seniors give up, 250,000 life insurance policies with a total face value of $57 billion could be sold through a life settlement with the policy owner reaping the financial benefits instead of the insurance company. The life settlement industry currently serves less than 1% of the possible market in America, so education is paramount.  
​-
Up until you receive funds from an investor in exchange for your life insurance policy, at any point in the process, you can change your mind and retain or regain full ownership of your life insurance. Qualified and reputable brokers don’t charge fees upfront, so all of their research about what your policy may be worth is free. For this reason, learning about life settlements and whether selling your policy may be the right financial move for you is always a good idea.  ​