Up until recently, senior citizens with an unwanted life insurance policy had two basic options. They could either allow the policy to lapse, or surrender the policy for the cash value, for typically much less than the death benefit.
Now a third option has emerged: life settlements for seniors.
Still fairly new in the investment industry, a life settlement is selling a life insurance policy to a third party investor. In doing so, you may get less than the death benefit, but you do stand to receive much more than the cash surrender value.
The investor will continue making payments on the policy and will receive the death benefit when you die.
Why Would Anyone Want a Life Settlement?
There are many different reasons why a senior citizen would opt for a life settlement, such as:
- Another life insurance policy has been obtained
- The policy was originally bought for their children, who no longer need it
- The policy holder has a large estate and doesn’t need life insurance anymore
- Unexpected health issues have happened and the money is needed now
- The premiums have become too high
- It provides a hefty payout right away, and the money can be used for whatever they wish
Who Can Benefit From a Life Settlement?
Before jumping into a big financial decision like selling a life insurance policy, it’s important to do your homework and decide if it’s the best option for you.
With that said, there are some people who can benefit the most from a life settlement. Ideal candidates are those who:
- Are over the age of 65
- Hold a life insurance policy that has a face value of at least $250,000
- Have had a change in their insurability since the policy was started
If you don’t fall into any of these categories, it doesn’t mean that a life settlement isn’t right for you.
Weigh the pros and cons, determine how much you stand to make, or lose, and continue on from there.
For senior citizens who want to get out of their current life insurance policy, a life settlement just may be the answer. No matter the reasons for wanting to sell, life settlements are only for life insurance policies that you are ready and willing to give up.