Posts Tagged ‘life insurance settlement’

Settlements and Life Insurance Companies

When you take out a life insurance policy, there is little to be concerned about, right? All you need to do is day the premiums as required. In the case of your unfortunate passing, your family can then file a claim. In a sense, this rather simplified explanation would be an accurate one. However, there are other phases to dealing with life insurance companies that the aforementioned scenario. You have the option of taking part in a life insurance settlement plan.

If you are not completely familiar with how life insurance settlement plans work, you probably are not alone. Life insurance companies do not have a long and storied history of being involved with these deals. They have become popular in recent times and, for those looking to a unique and novel way of investing their money, settlements might be worth exploring.

What is a life insurance settlement?

A life insurance settlement is when someone invests in another person’s life insurance policy. The way this investment works is the investor will outright buy the life insurance policy from the holder. The investor then acquires all the death benefits on the policy. The buyer of the policy will have to make all the remaining premium payments on the policy. If not, then the policy would default and the investor would not be able to recoup the benefits when the person on the policy passes away.

What would be the benefit here for the person on the policy?

Basically, the person would get a nice, lump sum payment in advance of his/her untimely passing. Usually, the investor would purchase the policy for 40% or less of the payout amount. So, if the policy was for $250,000, the person that originally purchased the policy would receive $100,000. The benefits to the investor are obvious:  he/she would make a huge profit once the life insurance policy is collected upon.

Now, not everyone is in the position to seriously think about selling a policy. Generally, the policy is best sold by someone that is up in age and has an illness that will soon claim his/her life. While it may be morbid to think of such things, there might also be pressing financial issues that selling the life insurance quickly could care for.

If someone feels they would benefit by selling their policy, then they should reserve the option to make such a sale. Doing so might turn out to be a wise course of action to take which is why so many serious are considering it and a large number of people have already done so.