Selling your life settlement can give you some much needed flexibility. Here are tips on how to sell your settlement.
Sell Your Settlement: 3 Tips For Selling Your Life Settlement
In our guide we will go over the history of life settlement and tips on how to sell your life settlement. I try to provide solutions to every guide and every avenue of personal finance.
If you sell your settlement, you can open up a door of new options for you to help you in your personal financial planning. By selling your settlement, you can:
- Lower your expenses on high premiums
- Exit an unfavorable life insurance policy
- Receive value for a policy you no longer want or need
In order to accumulate wealth, you need to keep your expenses low and remain in a positive financial position.
Use our personal financial plan example to help guide your financial future. Let’s get into the history of life settlements and your options for selling your life settlement policies.
‘Life Settlement’ Defined
Life settlement refers to taking a life insurance policy and selling it to a third party in exchange for a one-time cash payment. This results in the purchaser becoming the life insurance policy’s beneficiary and they take over making premium payments.
The purchaser is usually an institutional investor with a lot of experience, and the policy has a face amount over $250,000 in value. A life settlement is similar in many ways to a ‘viatical settlement.’ Ensure you have proper health insurance coverage upfront for an affordable cost, I conducted a Liberty HealthShare review.
‘Life Settlement’ Further Explained
Usually life settlements are only done whenever an insured individual doesn’t have any known life-threatening illnesses. Often they are done through the use of “key individual” insurance policies that companies hold on executives, who do not work there any longer.
The company has the opportunity to cash out on an insurance policy that was illiquid previously. At times individuals will outgrow needing to have a certain life insurance policy. You should know how much life insurance you need upfront.
In these situations, a life settlement might offer the opportunity to receive more than the cash surrender value of the policy.
Life Settlement History
The fact that life settlements exist has provided life insurance policies with a secondary market. Although the life insurance secondary market is fairly new, it was in the making for 100 years, thanks to numerous key individuals, judicial rulings and events.
Grigsby v. Russell, 222 U.S. 149 (1911) was a U.S. Supreme Court case that established that life insurance policies are private property, and that the owner of them can assign them at will. The opinion of Justice Oliver Wendell Holmes was that life insurance possesses all of the regular characteristics of property, which means they represent an asset that can be transferred by the policy owner without limitation.
The opinion of Holmes placed a life insurance policy’s ownership rights on the same legal standing that traditional investment property has, like stocks and bonds. A life insurance policy, like those properties, is transferable to another individual at the policy owner’s discretion.
The decision by Holmes established that life insurance policies are transferable properties that possess specific legal rights, which include the right to:
- Change or name the policy’s beneficiary (unless it is subject to certain restrictions)
- Borrow against the policy
- Assign the policy to be used as collateral for a loan
- Sell the insurance policy to someone else
Further Viatical Settlement History
During the 1980s, short life expectancies were faced by AIDS victims, and they frequently owned life insurance policies that they didn’t need any longer. This resulted in the emergence of the viatical settlement industry. With a viatical settlement, a chronically or terminally ill individual sells her or his life insurance policy to another party in exchange for a lump sum of money.
This third party then becomes the insurance policy’s new owner, takes over paying the insurance premiums and whenever the insured dies receives the entire death benefit. Due to medical advancements, individuals with AIDS started to live longer which has made viatical settlements not as profitable. This has resulted in the emergence of the life settlement industry.
The life settlement industry is a fairly new practice in the insurance industry. It has been in existence since the 1980s, and as such, there are many people who still have questions regarding this business practice.
Nonetheless, for more than 30 years now, selling life insurance policies in a life settlement transaction, usually through settlement brokers has been a viable option for many life insurance policyholders.
This is especially the case for individuals who cannot keep up with the premium payments, people who no longer want and or need the policy. Let’s get into some of our favorite tips to sell your settlement.
Best Tips to Sell Life Insurance Policies
With this in mind, herein we will explore some of the best tips with regards to selling life insurance policies. When selling your life insurance policy, you should evaluate if this will improve your future wealth position. Read on if you need some guidance.
#1. Evaluate Your Needs
To evaluate your needs, ask yourself these questions:
- Do you the policy?
- Is the policy at risk of lapsing?
- Are there new and more economical policies available?
- Do you no longer need the policy?
- Are the premiums you are paying becoming more expensive?
#2. Conduct Thorough Research
After considering all the factors surrounding your life insurance policy in relation to your needs, and you have decided selling it through the life settlement option is the right choice, it is time to do some research. First and foremost, you need to research the eligibility requirements.
These usually vary by state. Genesis Asset Advisors has listed the typical criteria that individuals looking to sell their life insurance policy must fulfill.
Criteria for Individuals Selling Their Life Insurance Policy
- Has the insured individual attained an age of 65 years or more?
- What type of policy is it? Universal Life, Whole Life, or Terms Life policy?
- Also, is the face amount for the policy $100,000 or more?
- Is your policy no longer affordable, needed or wanted?
- Does your policy need to be lapsed or surrendered?
- Is the policy a term policy that the owner will not convert into a permanent policy?
- Has your policy been in force over the last 2 years?
The above-listed criteria functions as a basic guideline. Therefore, although an ideal candidate should fulfill the criteria, every case analyzed and evaluated individually.
Another bit of research on how to sell your settlement, you need to take care of early on is finding a trustworthy brokerage firm. When you deal with the right firm, you save money, time, and you negate stress.
A good life settlement broker is one that educates you on the life settlement industry and all its various facets. Moreover, the settlement firm will represent the policyholder throughout the process of selling the policy and even after the process has been completed.
As you can appreciate, owing to the important role the settlement broker plays, you need the best and most trustworthy you can find. As such, finding a good settlement firm makes sure you get the best outcome possible. A good broker helps you get the best deal and ensures the process is hassle-free and stress-free for all the parties involved. It’s better than flipping things for profits.
#3. Weigh the All Options Available
The process of selling your life insurance policy is not cookie-cut as you might think. Each case is different and the final settlement is based on the specifics and intricacies of individual cases. This means that if you are contemplating selling your life insurance policy, you have a few options to choose from.
The most common and in some regard, the most popular form of selling your policy entails selling the entire policy for a cash value greater than the cash surrender value. An alternative to this is to sell a portion of your life insurance policy whilst retaining a portion of the policy to leave behind for your loved ones.
If you are in need selling your life insurance, go here.
Follow our financial freedom quotes to keep you motivated in your personal financial planning process. Evaluate your best options that suit your needs. Not someone else’s,
Will you sell your settlement? Let us know in the comments below. I’d love to hear from you.
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