Life settlements, the selling of one’s life insurance in return for a lump sum of cash, have been offering a nice option for a growing number of policy holders over the recent past who previously thought that they had no other alternatives other than to cancel or lapse their coverage.
What Are Life Settlements?
Life settlements, often referred to as Viatical Settlements, are essentially defined as existing life insurance policies that are sold to third party buyers for cash. The amount received is typically less than the policy’s death benefit, however, it is oftentimes a great deal more than the cash surrender value – which can make the transactions highly attractive to those who were otherwise simply planning to cancel or lapse the policy in return for far less.
In many instances, both the insured and the policy itself need to meet certain qualifying criteria in order to be considered by a purchaser. For example, the policy must have been in force for a minimum number of years. This helps to prevent individuals from purchasing life insurance for the sole purpose of quickly turning around and selling it to an investor for profit.
Likewise, the health of the insured will also be reviewed. Information such as medical condition, recent surgeries and/or diagnoses, physical and mental impairments, and even overall lifestyle factors will be reviewed. Certainly age, gender, height, and weight will also play a role in helping the potential policy purchaser to determine the insured’s anticipated life expectancy.
Once the insured’s estimated life expectancy has been determined, the proposed buyer can obtain a better idea of the policy’s market value. If the value of the policy is high, it is likely that the seller of the policy will be made an offer for purchase.
Why Life Settlements and Why Now?
Today, many life insurance policy holders have been driven to discontinue their coverage due to changing life circumstances, or even dissatisfaction with their coverage itself. Consumers have always had a legal right to sell or “assign” their life insurance coverage.
Yet, because insurers have typically kept this information relatively “hush hush,” it has only been within the past decade or so that word has spread about the ability to do so – and the tremendous benefits it can provide.
Just some of the ways in which cash from life settlement transactions can be used include:
- Payment of unreimbursed medical expenses
- The payoff of a home mortgage
- The purchase of a second or vacation home
- Travel or a dream vacation
- Paying down high interest credit card or home equity debt
- Payment of nursing home or other long-term care related costs
- Replacement of assets that were lost in a down market
The list can go on and on. And, although there are certain criteria that must be met in order to qualify for a life settlement transaction, once the money is received from a policy purchaser, there is no limit to what it may be spent on.
For those who are seeking additional information on selling a life insurance policy, it is best to work directly with a viatical company such as Harvest Asset Conversion Solutions – harvestACS.com. Here you will find the information needed to determine whether you qualify for a transaction, as well as details on what to expect throughout the process.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.