life insurance

What Do You Know About Life Insurance Settlements?

You may have heard of viatical settlements, where people who are terminally ill can sell their life insurance policy to an investor for a portion of the policy's face value, but did you know that even if you're not terminally ill, you can still sell your policy?

Life insurance settlements or "senior settlements" are contracts allowing a policyholder who is not terminally ill to sell his or her own policy. By selling your life insurance policy, you will not get back the amount that your death benefits would have been worth, but an investor will pay you a portion of the policy's face value. The way it works is that the investor or company that buys your policy will continue to make payments on your life insurance policy, and once you have passed, the investor or company will receive the full amount of your death benefits.

Is this something new?
Actually, no. Life insurance settlements have been around for a while, but many policyholders and consumers don't even know this option exists. That's why the Life Settlement Coalition was formed. The Life Settlement Coalition is meant to educate consumers and insurance companies about life settlements. The Coalition is made up of experienced brokers and life settlement providers whose main goal is to bring to the table the option of a life insurance settlement to life insurance policyholders.

Is it the same as surrendering a policy?
No. When you surrender your life insurance policy for the cash value, all you are doing is selling your policy back to the insurance company. Whether you're interested in either surrendering your policy or getting a life settlement contract, it is important to ask your broker or insurance agent about both options first. You may get a substantially higher amount of money back from a life settlement contract, compared to surrendering your policy. Life insurance experts say that up to 25 percent of life settlement polices cash out higher than the surrender value.