Life settlement are similar to the sale of a car or home. The rights of the life insurance policy are legally transferred to the new owner of the policy. The buyer will then be responsible for future premium payments and has a right to own it. A life settlement is a cash settlement that you get when you sell it to the buyer.
When is it done?
A life settlement is done by those who no longer need it and opt for the cash. At times, people need cash immediately for various reasons and do not find it necessary to hold onto the life insurance policy. During emergencies, the life settlements are sold to obtain cash so that the seller of the policy can use it for personal reasons. The reasons can be due to costly premiums of the policy which can be a financial burden. The original purpose does not exist then and the kids moved out and there is simply no need for it. Many times the beneficiary of the policy is deceased and the policyholder’s financial situation will proceed to improve.
Eligibility for life settlements:
There are certain general guidelines as to who can sell a life settlement. It is those who are above the age of 65 with chronic health conditions or those with severe health issues that qualify. Any type of policy can be qualified for a settlement like variable life, universal life, convertible term life, etc. One should approach a consultant to know more about the eligibility criteria.
What is the value of life insurance policy?
Every buyer in the market comes with different investment parameters like mortgage lenders who come with different guidelines for their loans. A life settlements offer varies from buyer to buyer. Some companies carry out a bidding process to generate competition and get the highest offer.
The whole process may take a few months to complete. The life settlement may be taxable in some states.