Life insurance provides your loved ones with protection and financial stability for years to come, in case something was to happen to you. For most, the need for life insurance decreases with age, and eventually results with an unwanted or unneeded policy. Until recently, the only option available at that point is to cash in the policy or simply let it lapse. Life settlements provide policyholders the option of selling their unwanted or unneeded life insurance policies for a price higher than the actual cash value. Are you tired of paying for your life insurance policy that you no longer need? Have your premiums increased to the point where you can no longer afford them? If you no longer want or need your life insurance policy, a life settlement may provide a more effective financial solution, rather than simply letting the policy lapse.
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Life settlements generally refer to the sale of unwanted life insurance policies. The secondary market, composed of investor groups and financial institutions, pay individuals for their unwanted life insurance policies. The policyholder has the opportunity to receive significantly more funds than available as cash value, yet still less than the actual face value. Investors, on the other hand, profit upon the passing of policyholder. Life settlements allow for a unique method of gaining a lump of sum money, while also eliminating the burden of paying life insurance premiums. Life insurance settlements are also great options if additional income is needed to supplement retirement savings or medical expenses.
Example of a life settlement
- Whole life insurance policy
- 73 year old male
- Policy face amount: $1.25 Million
- Cash Value: $77,000
- Life Settlement Payment: $475,000