financial advisors

Whenever you purchase a life insurance policy usually a financial advisor or insurance employee guides you to choose what kind of policy you should go for keeping various factors keeping in mind. Then later in life, the point may come when you feel the policy is of no use and you are unnecessarily paying the premiums like death of the spouse, no longer a partner in business, children are well settled, emergency, planning retirement life, you are not in the state to pay high premiums, etc. In such cases, your financial advisor will suggest you to surrender the policy for cash surrender value, but this amount is actually quite small and is not economically beneficial.

Typically, the financial advisors are not very familiar with the concept of selling the life insurance policy, so most of them will not recommend the life settlement option wherein you get cash value more than the cash surrender value. Because there are many legal and financial complicated transactions it becomes difficult for a financial advisor to execute the entire process, for life settlement you need a professional life settlement company that will guide and do the entire homework to find the buyer, negotiations and maximizes the sale value.  Remember, the sale price of the life settlement is always less than death benefit and more than the cash surrender value. Now keeping a few points in mind, if your policy qualifies these criteria’s the policy becomes eligible to life settlements. :-

  1. The policy should be a minimum of two years old.
  2. The age of the policyholder should be more than 65 years
  3. The face value of the policy must be more than $100,000
  4. Gender and health status is also an important factor in deciding
  5. Type of the life insurance policy  must be one of these types
    • Universal Life
    • Whole Life
    • Term
    • Convertible Term
    •  Joint
    • Second-to-Die

Financial advisors must recommend the life settlement option because this is beneficial for both [policyholder/ advisor] and this will strengthen the relationship between both the parties.  Financial advisors need to upgrade their knowledge and have robust information so they can guide the policyholder in which various solutions like borrowing loan against the policy, accelerated death benefit, withdraw cash from policy and life settlement.

Facts that you should know before you apply for a life settlement

  1. You will no longer pay the premiums; the buyer will pay the future premiums for a policy in force.
  2. The buyer will be entitled to claim death benefit after the demise of the policyholder.
  3. The buyer will have access to all your medical records and will be in touch with you to know about your health status.
  4. Since there are no set guidelines, the decision making can be difficult when it comes to the selling price for the policy.
  5. The money from the life settlement is like an income and is taxable so take care it will be taxed. Thumb rule is the amount above the total amount of premiums that you paidnto date.
  6. Selling policy may take a few weeks to a few months so keep the margin accordingly.

Hoping you have understood about a life settlement, there is another term called viatical settlement under which the policyholder is usually chronically ill and have a terminal health problem with life expectancy less than years, such policyholders generally will need money to sustain their medical treatments. So they can sell their policy through companies who specialize in a viatical settlement.  Basically, the formula goes like a policy with good premiums and the less life expectancy of the policyholder will fetch quick and great sale price. 

The benefits of a life settlement are:-

  • You get immediate lump sum payment the value more than the surrender value.
  • Get stress free as you dint have to bear the expenses of premiums any more.
  • You can cover medical bills and long-term care expenses.
  • You can use the money the way to want
  • You can plan retirement and enjoy your life.

Consulting an experienced financial advisor or licensed life settlement provider will give you the best option with what to do with your life insurance policy and helps to fetch a fair price.