Monday, August 4, 2014

What You Need to Know about Senior Life Settlements

For seniors, life settlements can be an important tool for securing their future or that of their family members. Life settlements involve selling a policy to another party in exchange for immediate cash. This is an attractive option especially when retirement or health insurance funds run low. Here’s what you should know about senior life settlements:


  1. Life settlements are legal and carefully regulated. There is a lot of confusion among the general public about what exactly a life settlement is and how it works. Some people worry that selling their life insurance policy to a third party means going through some sort of loophole or that it’s not valid. The truth is that senior life settlements are a well-known part of the insurance industry and that insurance companies perform these transactions regularly. Companies that buy life insurance policies have to follow careful regulations governing their practices, transparency and potential conflicts of interest. This is true whether the buyer is an insurance company or strictly deals in life settlements.
  2. You will not get the full amount of your policy. For seniors, life settlements can be a much-needed way to get a large sum of money quickly. For many seniors a settlement is a great option to pay for unforeseen expenses. But it is important to understand how a settlement works and how much you will make. The buyer will eventually receive your full benefit amount, the amount the policy is for on paper. That benefit will cover the cost they paid you for the settlement and provide the profit margin that makes the senior life settlement industry possible. Thus, there is no way they can pay you the full amount of your policy death benefit. 
  3. You will get more than the surrender value. The good news for seniors is that life settlements do provide a much higher cash value than simply surrendering the policy. Insurance companies generally allow you to “surrender” a life insurance policy, effectively getting a small payment immediately in order to give up your beneficiaries’ rights to the full benefit later. But this surrender value is much, much lower than the befit amount. Senior life settlements pay substantially more than the surrender value.
  4. You can use the payment for anything you want. For many seniors, life settlements are a way to offset burdensome costs, such as unexpected medical bills or the cost of long term care such as assisted living. However, sometimes healthy and active seniors will also utilize life settlements as a way to bolster retirement accounts and maintain the lifestyle they prefer for their golden years. Your settlement money is yours to do with as you see fit. 

Are you considering a life settlement?

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