Life settlements often entail the surrendering of your insurance policy to a third party for some fee or other arrangements. The process involves the transfer of the plan and its benefits from the policyholder to the buying third party. Many senior citizens that go out of work often fill life settlement contracts to meet their financial obligations.
Selling your policy may be a beneficial idea if you can no longer sustain the payment of its monthly premiums. You may also decide to sell your policy if you don’t need it or if you think that it has outlived its usefulness.
The life insurance settlement business is lucrative for brokers, insurance providers, and institutional investors that buy the policies. There is considerable competition in the market, and some life settlement companies use hard sales tactics that may land you a poor deal.
So, how do you get the best settlement company when selling your life insurance policy? Read on to get tips on how you can avoid mishaps when making such a settlement.
1. What are your current life insurance needs?
If you’re planning to sell a new insurance cover using the proceeds from your settlement, then you should consider whether what you settle for will suffice to give you enough coverage. If you’re a senior citizen, you may have to pay high premiums to get a similar cover because of your advanced age.
If your goal is to lower premiums, you may need to keep only some features of your protection and the amount of your policy coverage. You can also visit the exchanges and switch your policy for another if the settlement rates from your prospective life insurance settlement companies aren’t favorable to your financial and insurance needs.
2. Are there cheap alternatives?
If your need for money is the biggest driving force in your search for a settlement, then you should understand exchanging your policy for cash isn’t the only alternative. You should talk to your insurer to know whether you can get accelerated death benefits.
Accelerated death benefits are amounts that ’you’ll receive if you have long-term terminal sickness or some catastrophic accident. If that isn’t an option, you may also choose to borrow against your policy from a life insurance settlement company. To learn more about these options, you should talk to professionals in the life insurance settlement companies.
3. What is the life insurance policy potential payout?
It will not be easy for you to know the exact price that you may get from all the life insurance settlement companies. You may also not know whether you’re getting a fair deal when selling your policy. This secondary market for insurance policies is often less transparent than its first version. But to get an adequate understanding of the market, you should shop around by contacting different brokers or companies.
4. What will be the impact of your settlement?
The finances that you receive from your life settlement may bring unforeseen consequences to the financial life if you first don’t take caution. For instance, if you were participating in the federal or state programs such as Medicaid, then life settlements may make you ineligible for such programs. As such, you should not proceed with the agreement before understanding the full financial impact of your plan to your family.
You should at least consult some business professionals, attorneys, and accountants before you make a decision.
5. Is your dealer licensed by your federal government?
Learning whether your dealer has a proper license to operate within the state or not is important because it will help you to avoid dealing with some non-trustworthy people when you sell your life insurance policy. Most states need such traders to have licensure.
You can get more information on the life insurance settlement companies in your area by consulting your state insurance commissioner. You may also seek reviews from previous clients to understand the disciplinary history of whomever you’re about to trade your policy to.
If you’re in some financial hardship, and you have a life insurance cover that is becoming costly to handle or less useful, always take these insights into mind when trying to get a proper settlement.