BEST Life Insurance Settlement Options
BEST Life Insurance Settlement Options Florida
A life settlement provides a way to turn life insurance into cash (without dying).
A life settlement occurs when the owner of a life insurance policy sells it to a third party.
It is sold for a value that exceeds the policy’s cash surrender value but is less than the death benefit. At a high level, it is a simple transaction.
- The buyer:
- Pays the seller (life insurance policy owner) cash
- Is responsible for all future premiums
- Receives the death benefit upon the death of insured
Who buys my Life Insurance Policy?
The buyers of policies under the terms of a life settlement are sophisticated investors.
They only offer an amount, that when combined with anticipated future premium payments, will generate them an attractive return on investment (ROI).
Similarly, that positive ROI could be what your beneficiary receives if you keep the policy in force.
Who should consider a life settlement?
Although there are always exceptions, you may want to explore life settlements under the following circumstances:
Your age. You should be age 65 or older. Some settlements are offered at younger ages, but they are more attractive as the insured gets older (and more likely to die). In the case of life settlements, the older the better.
Your health. Buyers must calculate anticipated life expectancy as part of their process to make an offer to buy your policy. The reality is that buyers of life insurance find unhealthy insureds more attractive. As a result, you probably won’t find any buyers if you are in great health.
Type of life insurance. Buyers are looking for permanent insurance (universal or whole life) or term insurance that can be converted to permanent insurance without evidence of insurability.
Term nearing its end. You have a term life insurance policy that is nearing the end of its coverage period (e.g., year 14 of a 15-year term policy).
Death Benefit. You should own life insurance with a death benefit of $250,000 or more that is been in force for at least two years. There are some companies that will buy smaller policies, but the market for them is limited.
You have limited options. You can no longer afford premium payments and you have explored other options including the sale of other assets and policy options. For example, you might be in a position to downsize your home or take out a reverse mortgage.
Your life insurance policy may allow for policy loans. Or, the cash value may be used to make premium payments. There are a number of potential options. If none of them work in your situation, then you may want to consider a life settlement.
Death benefit not critical. Perhaps you purchased life insurance during your peak earning years with the idea the death benefit would pay for your kids’ college expenses and provide cash flow for your spouse until Social Security kicked in. Both of those needs have passed.
What Is a Life Settlement Broker?
A life settlement broker facilitates the sale of a policy to a life settlement provider.
In other words, if William, the policy owner, wants to sell his policy to Sam, the life insurance provider, he can hire Jim, the life insurance broker, to facilitate the sale.
It’s similar to the real estate market—the broker represents the interests of the policy owner, working with a number of providers to get the best deal possible for his client.
The broker receives a commission, or percentage of the settlement amount.
The percentage amount varies by broker.
For this reason, it’s important to shop around for a reputable life settlement broker who cares about you and intends to treat you fairly, but it’s fair to say that a policy owner should always work with trustworthy broker to maximize the amount of the life settlement.
Is Every Policy Owner Eligible for a Life Settlement?
Different providers have different rules to determine what kinds of policies they’re willing to buy, but all consider three factors:
- The age of the policy owner: the older the policy owner, the more quickly the provider can claim the benefit. For this reason, life settlement providers generally prefer buying policies whose owners are at least 65 years old;
- The value of the policy: they typically are also looking at policies with a value of at least $100,000; and
- The type of policy: providers are interested in permanent life insurance policies, or term policies which can be converted into permanent policies.
On average, life insurance policies sell for 5-30% of the death benefit amount—in other words, if an owner has a policy worth $1 million, he would receive between $50,000 and $300,000 in a cash settlement—but several factors affect the amount of the settlement. These include:
- The amount of the policy: larger policies sell for more
- The age and life expectancy of the policy owner: providers pay more for policies whose owners are older and have shorter life expectancies—the longer the life expectancy, the more providers have to pay in premiums
- The premium amount: policies with lower premiums are obviously more valuable, and providers will pay more for them
- The market rate of return: life settlements are larger when interest rates are low, since during these times it costs investors less to finance the money they use to purchase policies.
Mintco Financial BEST Life Insurance Settlement
If you’re finding it increasingly difficult to pay your life insurance premiums, perhaps because you’re now on a fixed income, or if you feel your policy no longer serves the purpose for which you originally intended it, a life settlement can give you the money you need to pay costly medical bills, continue to live independently and spend more time with your family.
Before you make the final decision to sell your policy, make sure you get the maximum amount of cash to which you’re entitled and protect your interests by working with a reliable and trustworthy life settlement broker.
Contact us at 813-964-7100