Is a Life Settlement in your future?

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What can a person, or business, do if they own a life insurance policy and no longer need or cannot pay for the policy?   Did you know: approximately 90% of all life insurance policies issued lapse before paying a claim.  A policy can lapse because premiums are not paid or term life insurance ends its term.   What if they could “sell“ their policy?

There are many reasons people buy Life insurance; and these reasons should not be minimized because a person’s actuarial chances are that they will not die during the greatest time of need of the life insurance.  What if they do die?  Remember, this is to provide protection for a spouse, family or someone against potential loss due to someone’s death.  A spouse purchases life insurance to pay off a mortgage and/or provide money for everyday expenses.  A person may buy life insurance to assure their children have a college fund; or for business reasons. Basically, life Insurance helps take care of loved ones by providing financial relief to those who must carry on without you; and provide security with cash when it’s needed the most.

 

Peoples’ needs change over time.  What if a person has paid off their mortgage or their children have finished college?  They may no longer need this life insurance plan.  Perhaps this plan was term insurance and the premiums have risen to a point where a person can no longer afford the premium.   In short, many people feel stuck when either their premiums increase or there is no longer the need for which the policy that they originally purchased.

There may well be solutions to this situation.  First, review your life insurance policy with your agent or a professional.  Look for your options defined within your current policy: paid up options, loans, etc.  If these options are not conducive, another option may be available.  It’s called a life settlement

A life settlement option takes place when a state licensed company buys the policy from the policyowner and continues to pay the premium. The company also becomes the beneficiary.  This may even work for people with term insurance.  Simply, the life settlement allows a policyowner a way to convert their policy into cash by selling the policy before it lapses or the term or coverage expires.  As a side benefit, the policyowner would eliminate future premiums.

From the years 2006-2009 life settlement options paid $5.62 Billion, on average 800% more, than the comparable amount offered by typical the insurance company claims.  Many people don’t realize there may be a way to benefit from their no longer needed or rising premium term policy.

The Life settlement market is highly regulated and certain criteria must be met to apply.  Some of the qualifications include the insured is over 65 years of age, with chronic health conditions, any type of policy can qualify for a settlement, and the face amount can range anywhere from $50,000 to more than $20 million.

In summary, if you have life insurance that is no longer needed, Universal life or term premiums have risen; you may options.  In situations, a life settlement company may pay you for your life insurance plan you purchased years ago.  Explore your options with a professional in this field.

Written by

Steven A. Buttice is the president of Medical Reimbursement & Management Services, Inc., a firm specializing in issues affecting seniors, including seminars and consultation on Medicare Plans, Long Term Care and other types of insurance, claims issues, and sales/service of insurance products since 1984.

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