Having a life insurance policy is a safety net that, after you’ve passed on, can provide some financial peace of mind for your family as the beneficiaries of the policyholder. This can cover things like funeral expenses and other costs. However, some people may find themselves in a place where they need to use that life insurance money earlier than expected.
Sale of a life insurance policy to collect on the premium in any capacity is an option, but it is important to understand the where, when, and why of selling off this insurance.
Life Settlements
If you can no longer afford to pay your life insurance premium, selling that policy can relieve the monthly payments and keep the cash you would have spent each month in your pocket. Life settlements usually result in a larger sum than canceling or surrendering the policy altogether. Selling a life insurance policy can be complicated, and it is important that, as a policyholder, you understand your coverage and the cash value of your account. You should also look into the regulations on selling life insurance policies wherever you reside in the United States.
Life settlements can be a complex process, so hiring a life settlement broker or independent adviser could be in your best interest as a seller to assure that you are getting multiple offers before settling on a particular bid when there’s more cash to be had. That extra money in your wallet could be the best way to fund a home renovation, but you still want advice to make sure that selling is actually a good idea. That renovation can help to increase the value of your home while avoiding having to rely on your credit score for a personal loan or search through home renovation loans that may not have the lower interest rate you need in the long run.
Emergency Costs
It could be worth selling off your life insurance policy if a sudden emergency expense arises. People who have been diagnosed with certain illnesses and need to pay for treatment see selling a life insurance policy as an immediate boost to their bank account that can cover medical bills. Even if your insurance policy has a terminal illness rider, you might get more money by selling off the policy.
Beyond medical expenses, some people who are diagnosed with a terminal illness may see selling off their life insurance policy as a means of providing for their family members upon their passing. It could be utilized for paying off a current mortgage, exploring vacation ideas for people who love the outdoors, or purchasing a bike, cabin, or car to cross out of a bucket list item.
A policy owner may test the life settlement market, as opposed to investing in a different type of loan that may not have a lower rate and could leave the burden of debt to the family of a policyholder with a shorter life expectancy.
Viatical Settlements
A viatical settlement is a payout solely to someone who has been diagnosed with a terminal illness. Eligibility for a viatical settlement is far narrower than eligibility for a life settlement. That’s not the only difference between life settlements and viatical settlements.
A viatical settlement refers to the sale of your life insurance policy to an independent buyer with the help of a viatical settlement broker. This is an offset of the life settlement industry that is strictly focused on terminal illness and patients who may be diagnosed with a condition that is incurable. The seller receives a lump-sum cash payment from the buyer in exchange for their insurance. The payout depends on the cash value of the life insurance policy. The payout will inevitably be less than the death benefit paid upon a policyholder’s passing.
A viatical settlement can be a great option to alleviate debt and avoid bankruptcy. The sale of the policy could also avoid patients falling into further credit card debt or relying on more loans. This would leave their loved ones in a difficult financial situation, and at a disadvantage following the policyholder’s passing.
Selling your life insurance policy is, of course, not the first choice anyone would make. Nevertheless, a viatical settlement or life settlement can be an excellent option for those who need to access the funds that are tied up by their insurance providers. If you or a loved one is looking into this, reach out to a life settlement or viatical settlement broker to hear about your options.
