Chicago, IL Many people are unsure about what life settlements are, the selling of a life insurance policy for cash, and how to best use them. They offer a variety of benefits, depending on your current stage of life. These benefits include the following:
- High Premiums
- Terminal Illness
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. 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 65 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. 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.
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, although you probably won’t be able to live off of a life settlement by itself.
Some people may want to sell their life insurance because they feel there’s no reason to continue paying life insurance premiums each month. This situation can occur when you lose your spouse and all of your children are self-sufficient. In these cases, you may want to enjoy life more rather than leaving your money behind.
Life settlements can help relieve you of the burden of paying a monthly premium, especially if you’re on a fixed income. This is the main 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.
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.
You can also use your life settlement to take your family members on a vacation while you’re still alive, instead of leaving them with a payout after you die. This strategy can provide them with wonderful memories of you.
These are all great reasons for selling your life insurance, but you need to learn more about life settlements to decide if this is the best option for you. It’s particularly important to consider where you are in life and whether it’s better to spend your life insurance money while you’re still alive.