When people decide on life insurance settlements, the decision is usually made when they don’t require it anymore, or if they have found a better insurance policy that will provide them with more benefits and a less premium.
When you decide to sell your life insurance, you can either do it yourself or find companies that buy existing life insurance policies and sell them to a third party. These companies assist with the selling process and make it as smooth and hassle-free as possible. The settlement agent will decide on a price for your insurance plan once they have assessed it; they will evaluate your health, age, the cash value account, and all the other aspects that are involved.
Before you sell your insurance plan, you have to know that the cash you receive after selling the policy is less when compared to the death benefits that your beneficiaries were going to get after you passed away. Yet, the price you receive when you sell is still higher to what you would get if you had to sell it back to your insurance company.
When you decide to sell your insurance policy to a life settlement insurance company, then you’re willingly entering into a contract with them. As a policy owner, you agree to surrender your insurance policy so that you get a cash payment in return. However, it’s important to remember that the cash you receive will be less than the face value which would be given to your beneficiaries when you pass away.
If you agree to sell your insurance plan for 50,000 dollars, when the face value of the plan was 100,000 dollars, the settlement company will take over the ownership of the insurance policy until they can find a suitable buyer who will take over the premium payments in the future.
- Once the policy sale is finalized, the owner will receive a lump sum amount from the company, once the transfer of ownership is done.
- The settlement company that takes your insurance policy will become the new owner until they find a suitable buyer.
- Name a beneficiary.
- Begin paying the monthly premiums.
- If you pass away before they see a buyer, the life settlement insurance company can collect the full death benefit upon the matured policy.
Listed below are the four stages that you have to complete for a successful settlement transaction:
When you decide to sell your policy, you will approach a settlement agent. The agent will require information that includes your age, health records and all the details from your life insurance plan; this consists of the type, face value, and premium rates and so on. You will receive forms that will request permission to your medical and insurance data.
- The medical record release form.
- Permission to contact the insurance company.
- An application to apply for a life settlement insurance.
Analyze and calculate the offer:
Once access is given to the settlement provider, they can check the records and life insurance data to know the worth of your insurance policy. The following factors are analyzed to see the value of your plan:
The medical condition of the policy owner, the shorter the life expectancy, the higher the value of the policy.
- The life insurance coverage amount.
- Loans that were taken against the policy.
- Premium amounts that are needed to keep the plan in motion.
- Issuing a rating of the insurance company.
- Prevailing interest rates.
- State laws that mention that amount that can be paid for a policy.
Close the deal:
If you take an offer from the life settlement insurance provider, then a purchase agreement is sent to your agent. These agreements have many documents that are needed to launch the transaction, and they go according to the state laws and your insurance policy. The deal is then sent back to the company for a signature. Once the agreement reaches the settlement company, then the cash payment process begins and so does the change in ownership at the life insurance company.
Receiving the payment:
Once the settlement company is notified by the insurance company that the process of ownership transfer is completed, then the payment policy is released to the (former) policy owner.
In the end, it’s important that you choose a reputed life settlement insurance company to help you with the process. A good company will guide you well and ensure that all the documents are in order. When used properly, a life settlement can convert an underfunded retirement account and turn their life around.