Are Life Settlements Worth It?

By: Kelly Ramirez
For some people life settlements have afforded them the opportunity to care for themselves and their families. People that turn their policies over to a buyer are given a specific amount which is related to how much the policy itself is valued at. That money is often used to cover the policyholder's expenses before they become deceased. When the original policyholder passes on the monies are paid to the current holder.
Prior to this option, the original policyholder could turn it back in to the insurer for a small financial reward or allow it to lapse. Either way, they would receive little to nothing in return. A policyholder may want to rid themselves the burden due to premium costs, the death of the original beneficiary, or they may not need the policy in some for numerous reasons. Selling off your settlement is not easy. There is money to be made, but there are also broker fees to be considered before the policy is sold.
Specific people are sought for selling their policies. It is in the best interest of the buyer to look for those that are older and most often, retired. Investments in those in their 30s is quite different form those in their 60s.
Selling a policy incurs some risks. The original policyholder could potentially not be able to get additional life insurance to take care of a family should they die. If there is no family, it is a matter of whether the money will last long enough to cover their individual expenses. It can create a less secure feeling.
Both parties benefit from life settlements. People who no longer wants to pay for policies have the right to sell them off at a fraction higher than what the insurance companies would offer and are no longer responsible for the costs associated with carrying them. The investor is banking on reaping back what they have paid out and then some upon the passing of the original policyholder.

1 comments:

Andrea said...

This is the latest trend that I just heard that people sell off their life insurance policy to third person for some set of money. There are several reasons because of which a person wants to sell his/her life policy, few of which you have listed above. Many do finds this option of great use and many are not at all in favor of it, so it depends on users need and situation.
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