Most people, especially seniors assume that if they own a life insurance policy that they no longer need or want they have but two choices concerning the disposition of the policy.
- They can cash it in for the value of the policy’s cash surrender value, or
- They can let is lapse
These folks do not know about a third option, known as the Life Settlement option. Your life insurance policy value may be much more than you think. Because the public is so poorly educated as to the benefits of the Life Settlement option, seniors are leaving loads of cash on the table when resolving what to do with unwanted insurance policies.
What Is a Life Insurance Settlement?
Life insurance settlements or life settlements is a way for a person who owns a life insurance policy to monetize the policy for his or her use before they die. The insured sells the insurance policy to a life settlements company. The life settlement companies pay the insured more than the cash value of the insurance policy but less than the face value. The seller gets immediate liquidity from an asset that was non-performing. The amount of money received is greater than if the insured cashes in the policy to the insurance company. Since the life insurance settlement option is not well known nor publicized, seniors mistakenly cash out policies leaving money they could have with a life insurance settlement behind.
In order to enter into life insurance settlements the seller must be over the age of 65.
Once the transaction is complete, the insured has nothing further to do with the insurance policy. The buyer makes the premium payments, and when the insured dies collects the death benefit.
What Determines the Value to the Seller?
Determination of the value of the policy to the seller is simply the highest price a buyer will pay for the policy. The primary evaluation tool used by the buyer is the Medical Evaluation (ME). The medical evaluation is a careful look at the medical records of the insured going back three to five years. A medical person reviews all medical records including hospital records, doctor’s office notes, lab results, and results of other diagnostic exams.
Based on this information, the life settlement company can make an educated guess as to how long the wait is to collect on the policy. This information determines how much more they will need to invest in it by paying premiums. If a medical evaluation determines that the seller has a year to live, he will receive a better payout than someone will with a similar policy that has an ME that estimates his remaining time to be three years to live.
In any event, the seller’s net gain is the face value of the insurance policy less the amount of the purchase price and the premium expense until the policy pays out to the buyer.
“You must get your life insurance policy value before you just throw it away. Seniors literally throw away billions of dollars a year.. without ever knowing.”