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Life settlement insurance

Do you have a life insurance policy and have considered cashing out or a life settlement? If you have a severe medical condition, terminal illness or are facing your later years in life, you may have considered such options as life settlements or viatical settlements. Understanding what is the best option for you starts with research.

Life settlements have come under a lot of scrutiny in the news lately and it is because they are becoming more popular than ever. But, with more popularity there is the potential of scammers and con-artists. Life settlements are very intricate transactions and need to be taken care of by trusted professionals. Knowing what you want and who you want to do it is key in making sure your life settlement transaction is done correctly.

Understand the Life Settlement Terms

First, you need to understand what a life settlement is and then decide if it is right for you. Before we go further, let’s understand the terms:

Life Insurance "Cash-Out or Cash Surrender Value": This is the amount someone would receive if they went to their life insurance company and told them that they decided they did not want their life insurance anymore. They would get a cash value that would be significantly lower than the face value and much lower than other options such as a life settlement or viatical settlement.

Life Settlement: This is a common choice among senior citizens or people who have a medical condition that will likely result in a shortened life expectancy. With a life settlement one would get a pay-out lower than the face value of the policy but higher than the cash surrender value. The policy holder receives the money by selling their insurance policy to a life settlement company and then when the insured dies the life settlement company will receive the benefits rather than the insureds original beneficiaries (such as their spouse or children).

Viatical Settlements: These are similar to the above life settlements but are for persons who have a catastrophic or life-threatening illness or condition (such as terminal cancer or AIDS). Just like life settlements, with a viatical settlement the policy holder would get a cash value generally higher than the surrender value but still lower than the face value. And again, the policy is sold to a viatical settlement company who then becomes the beneficiary of the life insurance policy.

Do You Really Want or Need a Life Settlement?

If you have considered these options, you need to take the time to research your needs and select a trusted company to handle the transaction you have chosen. When researching your needs remember, the above choices are for people who have beneficiaries who do not need the life insurance money anymore. If your beneficiaries will still need to be cared for financially you probably should not be considering these options. Instead, if you have financial obligations now, consider a loan. Your beneficiaries can pay back the loan with the life insurance money and still have some left for other financial obligations when you are gone. Also make sure you talk with your children or other close relatives as to why you are considering selling your life insurance policies and let them be involved in the process of helping you make the decision and finding a reputable life settlement company.

Research Tips for Finding a Trustworthy Life Settlement Company

If you have looked at your needs and decided that a life settlement or viatical settlement is right for you, it is time to do some research. Here are some tips to help you find a trustworthy and reputable company to handle your life settlement:

1. Contact as many life settlement or viatical settlement companies you can find. There is no "standard" pay-out rate so you will want to get an idea of the average pay-out you would get for your particular policy. If one company seems to be offering an extremely high pay-out for your life insurance policy then beware of them. They may be just trying to get you "hooked" and then they add a lot of loopholes that end up making your payment smaller.

2. Make sure the settlement company is licensed. If your state does not require licensing then check the company’s history and financial standing before doing business with them.

3. Be familiar with what "decision period" you have. After you make a decision and sign the papers your state has a law that offers a time frame in which you can still change your mind.

4. Understand fully the tax consequences of your decision. For this, consult a tax professional or an accountant, not the settlement company.

5. Make sure you are not alone in dealing with the settlement company. Use a trusted spouse, child, or close family member through the whole process. It is much harder to scam two people than one (although it has been done so again, do your research!)

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