Life Settlements

Need cash quick? Your life assurance policy is actually an asset you can liquidate. A life settlement is a transaction where you sell your life assurance policy to a third party for cash. A life settlement will yield a bigger amount as compared to simply surrendering your policy to the insurance company for its cash surrender value.

We highly recommend that you stick with your policy to ensure that your loved ones can benefit from the insurance payout when you die. Other options will be to take out a loan on your policy’s cash value or withdraw your dividends, if any. However, there may be circumstances in your life where you need to raise a substantial amount of cash. Getting into a life settlement may just be the solution.

How a Life Settlement Works

Here’s how it works: Third party investors buy your life assurance policy and you turn over the rights to the policy to them. This makes the third party investor the policy owner and the beneficiary. Upon your death, the investor will receive the proceeds of the life assurance policy.

Some Considerations Before You Get into a Life Settlement

Here are some things you should look into before you get into the life settlement:

  • Taxability.

    While life assurance proceeds are usually tax-exempt, the proceeds of a life settlement are not. The taxes will be based on a calculation involving three levels. First, premiums paid are not taxable. Second, if your cash value exceeds the premiums already paid, the difference between the two will be taxable. Third, the life settlement payout less the cash value will be taxable. So if you receive a life settlement payout of two to three times the cash value, you can imagine the amount of taxes you will have to pay.

  • Need for life assurance cover.

    Do you have people still depending on you financially? Do you have an aged spouse who will be left financially distraught with your loss? Is your mortgage fully paid up? If you still need the insurance cover, keep your policy and look for other sources of cash.

  • Age and medical condition.

    If your age and medical condition will mean that you can no longer get life assurance coverage when you want to, this should give you pause. You will not be able to replace your existing life assurance policy. If your medical condition has worsened, you may either need to pay astronomical premiums or may even be denied coverage by the life insurance company.

  • Privacy.

    To get into a life settlement, you will need to give the broker and third party access to your medical records. You should ensure that your privacy is protected by insisting that your name and contact details are not readily seen by just anybody.

To protect your loved ones for less, fill the form on the right to get your life insurance quote.