If you're having trouble with money and don't see an end in sight, you might want to think about selling your life insurance. You might not want to pay those high premiums at this point in your life if you have a disease that will kill you soon or if you are old. Selling your life insurance has a lot of complicated effects and big risks, so you should learn as much as you can about the big picture. If you want to find out more about selling your life insurance, this is a good place to start.
Basics: Words and phrases
If you've already looked into selling your life insurance, you've probably heard of two main terms: viaticals and life settlements. Both of these terms mean that you sell your life insurance to a third party. So what's the point? "Viatical" is usually used to describe a transaction involving an insured who is chronically or terminally ill, while "life settlement" is used to describe a transaction involving a senior who is not terminally ill and is usually over the age of 65.
You may now know the difference, but that doesn't mean your state does. These terms may be used interchangeably, or your state may use one of them to refer to both transactions. For example, your state could use the term "Viatical Settlement" to describe any kind of deal involving the sale of your insurance. Be aware that this kind of ambiguity may be present in the way your life insurance is described.
How it Works/b>br>br>
The owner of the life insurance policy will sell it to a third party for a lump sum that is a percentage of the death benefit. In exchange, the owner will get a lump sum payment that is often quite large. The third party then becomes the new owner and/or beneficiary of the policy and pays all future premiums. When the insured dies, the third party gets the death benefit.
People who want to sell their life insurance can either go straight to a viatical company or settlement firm or work with a broker. The broker will act as a middleman and give the information to several different companies or firms in order to get the highest price for the sale.
Investors' insurance is bought by the settlement firms on their behalf. In this case, the investors become the owners and the people who get the money, and the settlement company pays the premium until the insured person dies. The company then gets the death benefit and either gives its investors a share of the annual return or repackages the policy so it can be sold to someone else.
Take comfort in the fact that selling life insurance is usually a very private process. Most settlement and viatical companies know how important it is to keep things quiet so that the process goes smoothly and easily. But a company that tries to keep track of the insured's health may act rudely and get close to being intrusive. Because of this, it's important to work with a company that has a good reputation and a lot of experience.
Who Considers Selling
People with serious, life-threatening illnesses are more likely to think about selling their life insurance to get cash for things like mounting medical bills or other expenses. People who are not dying may want to sell their life insurance for a number of different reasons. If the owner's beneficiary has died or if the owner can't pay the premiums anymore, it seems like they don't need the life insurance anymore. Even if they don't have any debt, seniors who are getting close to retirement age may want to sell their life insurance to get a lump sum of money that they can use however they want.
Remember that different companies may have different rules about who can buy your life insurance policy.
Why you might want to sell your life insurance
Some of these benefits might be easy to see, but others might not be as clear.
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You'll get a lump sum of cash right away. As was already said, this is especially helpful for people who are dying and have a lot of medical bills.
- If you sell your life insurance, you will get more money than if you just give it back to the insurance company. An insured person who is at least 65 years old or who has a terminal illness may be able to sell a policy with little or no cash value for $100,000 or more.
- You will no longer have to pay for insurance. If your finances are getting worse and you don't see an end in sight, you can make things easier on yourself by getting rid of premiums.
- You don't have to pay back the money like you do when you borrow against your insurance policy.
- Even though your life insurance benefits won't be available after you die, you can still leave money to a person or organisation. The money will just come from what's left over after selling your policy and using the money for other things. So selling your life insurance doesn't make you rich. mean that you're definitely taking the gift away from the people you're giving it to.
- In some cases, you don't have to pay taxes on the money you get.
- There are no rules or limits on what you can do with the money you get. You can do whatever you want with it. You can spend as much or as little as you want.
What could go wrong if you sell your life insurance?
If you know the risks of selling your life insurance, you'll be able to make a better decision. Make sure you talk to a financial advisor or tax lawyer to make sure you know what the sale means.
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Some forms of public assistance, especially those based on your income and assets, may no longer be available to you (such as food stamps, welfare, Medicaid and some Social Security benefits).
There might be tax trouble. When the policy is sold, result in a tax bill if the amount of the settlement is more than what you paid for it.
- If the sick person gets better care, they may live longer than expected.
- You could end up with unhappy heirs. This might not bother you, but it could cause a long road of (possibly legal) problems and fights. Some settlement actual companies need the beneficiaries to sign off on any sale. This could be good or bad, depending on how cooperative the beneficiaries are.
There are also other choices.
There are other things you can do if you decide you don't want to sell your life insurance policy (though none that would provide you with such a large lump sum). An insurance agent should be able to help you with some of these ideas and give you more information.
You can get a loan from your insurance policy.
If the policy has surrender value, you can cash it in.
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Look into getting benefits faster or getting benefits for life.
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Use the life insurance policy as collateral to borrow money, maybe from family or friends.
If you think selling your life insurance policy is the right choice for you, make sure you work with a reliable, experienced broker or settlement company to make sure you get the best service and results from your transaction.
