Did you know you can sell all or a portion of a life insurance policy, even term insurance?
(4 minute read)
Life settlements can feel like the last frontier when it comes to wealth management. You know they exist, but there is a certain element of mystery or unknown about them. What are they really? How do they work? Are they safe and legal? Who qualifies for one? At Life Settlement Advisors, we are experts in all things life settlement. In this blog, we are going to answer all of those questions and more about life settlements.
How Do Life Insurance Settlements Work?
Essentially a life insurance settlement is when the owner of a life insurance policy sells that policy to a third party buyer. This transaction results in a one-time cash payment for the seller. In exchange, the buyer becomes the policy’s beneficiary and takes over the premium payment. Once the seller dies, the buyer then receives the death benefit. Typically, these transactions involve brokers or advisors on either side of the agreement to make sure both parties are getting a good deal and that all the paperwork and legal proceedings are done properly.
Who Qualifies for a Life Settlement?
While there are several different factors that contribute to life settlement eligibility, it’s important to remember most of these rules have exceptions of one kind or another. For that reason, it’s important to reach out to trusted life settlement companies, like LSA, who can help you decide on an individual basis if a life settlement is right for you. That being said, the following criteria should be considered:
In most cases, an individual must be over 65 years of age to qualify for a life settlement. In some cases, if an individual is younger than 65 but has certain medical conditions, they may qualify.
Type of Insurance
Term Life, Convertible Term Life, Survivorship Universal Life, Survivorship Whole Life, Whole Life, and Universal Life policies can qualify for life settlements, pending approval of a few other conditions.
Death Benefit Amount
To be eligible for a life settlement, a policy with a death benefit of at least $100,000 or more is required.
Typically, policy premiums need to be less than 5% of the policy’s face amount.
A policy must have been active for at least more than 25 months to qualify for a life settlement. However certain states may require that a policy be in force for up to five years, so be sure to check with your life settlement advisor to learn more.
Type of Ownership
Typically speaking, a policy owned by almost any type of entity can qualify for a life settlement. This includes but is not limited to, individual, corporate, foundation, business, non-profit organization, or trust.
While not necessarily required to qualify for a life settlement, some other considerations include the current health of the policy owner, the cash surrender value of the policy, and any outstanding loans against the policy.
To find out more on whether you qualify, check out our Life Settlement Calculator.
Are Life Settlements Legal? Are Life Settlements Safe?
If done properly, life settlements are both legal and safe. When settled with trusted advisors and brokers by your side, you can assure you are getting a good deal within the confines of the law.
How Much Is A Life Settlement Worth?
While there is no blanket answer to this question, most life settlements pay somewhere between 10-35% of the face value of the policy. The amount you can expect to receive will vary depending on the qualifying factors we mentioned earlier. For example, the worse condition your health is in, the more lucrative the offer might be.
Life Settlement Advisors…Experience You Can Trust
At LSA, let us be your trusted resource on all things life settlement. We can help you with structuring a life settlement or even selling your own life insurance policy. With more than 40 years of experience, we strive to offer sound advice to every client or advisor we meet. Our goal is to help educate you, not pressure you. That way you feel empowered to make the best decisions for you. Reach out to us today to see how we can help you!
Did you know you can sell all or a portion of a life insurance policy, even term insurance? Selling an unwanted life insurance policy is no different than selling your car, home, or any other valuable asset that will create immediate cash. Contact us today to learn more.
Life Settlement Advisors