What is a life settlement and who qualifies for one

words Alexa Wang

What is a life settlement

For senior citizens looking for some extra cash, the easiest way to get your hands on good capital is to sell your insurance policy to a third party in exchange for a one-time cash settlement. The value of an individual’s life insurance policy varies depending on the sum of their policy payout, which is also known as the death benefit.

In other words, the value amount that your beneficiaries would have been handed after your death plays a part in how much you can sell your policy. Typically, policy payouts have to be at least $100,000. Your health and the kind of policy you own (universal, group policy, whole life… etc.) also partially determine the value of your settlement. That said, selling your policy is quite profitable with the right guidance, and those interested in taking such a step may want to calculate their policy’s value and eligibility before contacting prospective investors. While most seniors qualify for a life settlement, the process is a little more complicated than that.

Why you might want to sell your insurance policy

Policyholders have a valuable asset under their belts, which can be valued at thousands and eliminate the need to pay for expensive premiums. Although this terminates any capital that could be passed down to your heirs, you’ll sometimes find yourself landing a better deal to sell it, especially if you’re currently in need of some capital. According to the information at https://qlifesettlements.com/life-settlement-companies/, experts can help you evaluate your policy and find the most suitable investors to sell your insurance at the best price. Selling life insurance can be as complicated as selling a home, and having the right professionals by your side is important.

Where to start

Before policyholders take the leap of selling their insurance, it’s best to determine the average value of their policy. There are online calculators that you can use for evaluation, but they’re not as accurate as directly contacting experts in the field. Typically, some policies qualify more than others, namely convertible term life policies and whole life policies. There are also companies that will offer to find an investor on your behalf, free of charge, in exchange for a fee they collect from the settlement company or individual investor.

Professional help

Specialized brokers can help you find a willing investor that can exchange your insurance for at least five percent of your death benefit and in many cases, more. Depending on how much your payout amount is, this can earn you thousands instantly. Many brokers deduct the fee from the investor, rather than policyholders, which is also a plus. We advise you to do your thorough research and browse your options for comparison before making the final, irreversible decision.

Eligibility

As previously mentioned, your health and the kind of policy determine not only the value of your insurance but the eligibility for a settlement altogether.  Life settlement providers will assess your policy, usually starting off by analyzing your medical records to check whether you’re terminally ill or have any chronic complications, which in turn play a part in the criteria that makes you qualify for the settlement.

Universal life policies, convertible term life policies, whole life policies, and permanent policies are the only types that qualify for settlement. Other types, such as premium, do not qualify. The period of time that you’ve had your insurance also contributes to the needed criteria. Settlement companies will check reports of how long you’ve owned the policy before finding you an investor. However, the minimum number of years required varies from state to state. Depending on where you live, some investors may even skip this step in cases like divorce or the death of a spouse.

Unfortunately, the value of your policy is also a major contributing factor to your eligibility. Most contractors will overlook applications with values of less than $50,000. But this, of course, is a rough estimate. The good news is, the age of your policy ups its value, so if you’ve had it for more than twenty-five months, you’ll likely qualify in return for a fair price.

But the age of your policy is not the only factor settlement companies will check; your age also plays a part. Most seniors, who have reached the age of seventy or older, are eligible; whereas, younger individuals will find it more challenging to find an investor. This has less to do with the amount of your payout and more with your life expectancy. Older individuals have a lower life expectancy, and this, along with their medical records, renders the value of their policy. Terminally ill seniors with chronic diseases are more likely to qualify than healthy individuals.

Is it worth it?

The short answer is: yes. But only if your death benefits equals or exceeds $100,000, which will amount to greater capital for individuals whose health is chronically impaired. Settlement companies are evolving, and more healthy seniors are now able to sell their policies for less, but it’s far less lucrative and will be estimated at a much lower value. Although age plays a major part, younger chronically ill individuals may also benefit from settlements. Other factors, such as type of ownership do not contribute to value or eligibility. Any entity, such as an individual, corporate, or business, including non-profit organizations, typically qualify. Just make sure your policy is issued by a U.S based company to guarantee eligibility. 

What is a life settlement

Selling your insurance policy is a big and irreversible step that requires plenty of reconsideration and professional advice. If you’re in dire need of cash to pay back your debts or if you’re in a financial dilemma and are unable to pay for health care services, selling your policy is recommended. However, if you’re in no need for immediate capital and are only looking through your options of getting some extra cash for retirement, you may want to contact a financial advisor that could introduce you to other less severe steps. Professional settlement companies can provide guidance, and will most likely advise you against selling your policy if you don’t need to, despite eligibility. Make sure you check reviews and browse through reputable investors before making this step.

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