The Facts About Life Structured Settlements
The Benefits of Structured Settlements: Kyle's Story
Until very recently, there were only a few options available to people who no longer needed their life insurance policies. They could either surrender their policy to the insurance company that had issued it for its cash surrender value or they could just stop paying the premiums and allow the policy to lapse. With regards to term insurance or any other policy without a cash surrender value, the only choice available was to let the policy lapse. However, there is now a secondary insurance market in which policy holders may be able to sell their policies for more than their cash surrender value or sell a term policy without any cash surrender value. These transactions are called life settlements.
There is a very simple concept behind life settlements. Basically, a policy holder will sell his or her policy, normally through a broker, for a fixed value that is usually three to four times the amount they would have received by simply surrendering their policy to the issuing life insurance company. The buyer in these cases is usually an institutional investor and will take over the payment of the premiums as well as collect the death benefit once the policy holder passes away. The purchase price of a life settlement is determined by considering the policy holder’s average life expectancy along with the respective cost of premiums to keep the policy operational within its term. Thus, a life settlement will allow you turn a relatively untouchable asset into something immediately useful and liquid.
There are two types of life insurance settlement transactions -
1. Life or Senior Settlements allow policy owners above 65 to create immediate liquidity from unaffordable or obsolete life insurance policies.
Viatical Settlements help someone facing a terminal illness to make use of the present day value of their life insurance policy. The cash can then be used to offset the prohibitive costs of medical care.
Think about what you could do with the money. It may just be a good way of helping you to make ends meet but it may be able to pay for the holiday that you now cannot afford, for some white goods or house repairs or maybe you want to give it to your loved ones early so that they can enjoy the money while you are still around to see them enjoying it.
Life settlements can be considered for the following types of insurance:
· Universal, Whole or Variable Life
· Term (if convertible)
· Survivorship (any type)
· Adjustable Life
Joint First to Die.
There can be many reasons opting for a life settlement. In times of financial crisis or when you simply can’t afford your premiums, the liquid cash might be necessary. For others, funds may be needed on an urgent basis. In some cases, coverage may no longer be required, for example if the primary beneficiary has divorced the policy holder or died or the business has been dissolved. Rather than simply allowing a policy to expire or surrendering it to the issuing company, life settlement firms are able to help consumers to maximize the value of a dormant asset.
Resource Author Francisco Rodriguez H.
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