Chicago, IL Over the years, the life settlement brokers at Windsor Life Settlements have heard many reasons why their clients sell a life insurance policy for cash. The most common reason is to help cover the costs of medical care and long term care. Many people are unsure about what life settlements are, others are unaware of the financial option entirely. How to sell a life insurance policy for cash can be a significant decision. Most policyholders are off to a great start using a life settlement calculator to determine eligibility. Life settlements offer a variety of benefits, depending on your current stage of life. These benefits include the following:
Learning more about the benefits of a life settlement will help you determine if this is the best choice for your particular situation.
A life settlement occurs when you sell your life insurance policy to third party for cash. The value of this sale will be more than the policy’s cash surrender value but less than its death benefit, which is also known as its face value. The buyer will continue paying the policy’s premium to the insurance company and receive the death benefit when you die.
Life settlements are often worth considering when the only other alternatives are to surrender the policy or simply allow it to lapse. The ideal candidate for a life settlement is someone who is at least 70 years of age and has a policy with a face value of at least $100,000, although some experts recommend a minimum value of $200,000. Policyholders with significant health impairments are qualified at any age. Anyone considering a life settlement should consult with a financial advisor before making this decision.
The retirement savings of many people were significantly reduced during the most recent economic downturn. You may need a little extra money to live on while the market recovers, or you may not have had enough savings to begin with. You may also need to pay off some accumulated bills. If you’re like our client Ted Muller, you might seek out a life settlement to pay for bucket list items like travel and a new car.
Creating additional retirement income is one of the most common reasons for selling your life insurance. You can structure a life settlement so that you receive a payment each month instead of a single lump sum. This strategy is helpful for making ends meet when you’re living on a fixed income.
Some people may want to sell their life insurance because they feel there’s no reason to continue paying life insurance premiums each month. The policyholder’s children are fully grown and the need for the policy has been greatly reduced but the cash equity in the policy can still be accessed. In these cases, it might make sense to convert the policy to a single cash sum.
Life settlements can help relieve you of the burden of paying a monthly premium, especially if you’re on a fixed income. This is a common reason so many people simply allow their life insurance policies to lapse. However, a life settlement provides you with the opportunity to recover some of the money you’ve paid into your life insurance over the years.
This is the most common reason that we have heard over the years as to why people are interested in selling their policies. In a recent case, our client set up a fund to cover medical bills, home renovations, and an income stream for his wife for the rest of her life.
People who are terminally ill often consider life settlements to be a means of supporting themselves once they’re unable to work. Life settlements help pay for regular expenses such as medical treatment and hospice care. Some people also use them to pay for long-term facilities.
A life settlement can provide tax benefits. The proceeds from such a sale are taxed as regular income, although the IRS defines the proceeds as the difference between the premiums you paid and the settlement amount. That means you only pay taxes on the profit you made from the sale of your life insurance.
Another very popular and powerful answer that our life settlement brokers will hear is that people want to be alive and present to see their children and grand children enjoy their inheritance. Being able to see grandkids open gifts, take family on vacations, fund college tuitions etc, is a blessing that policyholders will seek out for various personal reasons.
There are many great reasons for selling your life insurance policy for cash. You can learn more about life settlements and decide if this is the best option for you. Once you decide to pursue a life settlement, preparing for the life settlement process will be what comes next.
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