If you want to discontinue your life insurance policy for some reason or the other, you can obviously apply for a policy surrender or cancellation. You’ll get the accumulated cash value in return from the insurer, after you surrender it. However, do you know that you can actually sell your policy for almost three to five times the surrender amount?
Does it sound too good to be true? Well, you don’t need to be surprised anymore. The insurance industry has evolved a lot, and it has come up with a financial tool called the Life Insurance Settlement.
Does it sound too good to be true? Well, you don’t need to be surprised anymore. The insurance industry has evolved a lot, and it has come up with a financial tool called the Life Insurance Settlement.
What is a life insurance settlement?
Life insurance settlement is a provision that is especially available for the senior citizens. It allows the insurance holders to sell their unwanted life insurance policies at a much higher value than the cash surrender value of the policy. The policy owner usually transfers the possession of the life insurance policy to any financial institution, and gets a lump sum amount of cash in return. The amount received from the policy depends on the value of the policy at that point of time, and also on the insurance company rating. Consequently, the institution or the company which makes the purchase will be the new owner as well as the beneficiary of the life insurance policy. The premiums will be paid by that company only, and after the insured person passes away, the company will draw the death benefits from the policy.Types of life insurance settlement
Several situations might force the insurance holder to stop payments for his or her life insurance policy. Instead of letting that policy lapse, one might easily opt for life insurance settlement. The settlement can be done in two forms as mentioned below:- Life settlement - An individual who is not suffering from a chronic or terminal illness can opt for this kind of settlement. The reasons might be personal, like shortage of funds, need for reduced premiums, changing requirements of the dependents, urgent cash requirements for emergencies or debt payments etc.
- Viatical settlement - Individuals with terminal or chronic illness is allowed to opt for the viatical settlement. The funds received after selling off the policy can be used for the expensive medical treatments. It can also provide financial assistance to the insured person’s family by compensating for his/her loss of income.
Minimum requirements for a life insurance settlement
Each and every person who has a life insurance policy will not be allowed to opt for a policy settlement. The basic requirements which determine the eligibility for a life insurance settlement are:- The insured must be aged 65 years or more.
- In case of a viatical settlement, the individual must be over 21 years with a life threatening medical condition.
- The minimum face value of the policy should be $50,000.
- The life expectancy of the insured person must be below 15 years.
- The policy coverage must be in effect beyond the two year contestable period.
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