When To Consider Selling Your Life Insurance Policy?
By Paul
A Life Policy is a personal property, like a house, car, antiques, old painting or stocks and bonds. You can sell your life policy like you sell your other personal property items. Life may now be viewed as a traditional asset that can be purchased or sold. Sale of Life policy is called as Life settlement, Life settlement or Senior settlement.
Millions of seniors are unaware of the flexible and liquefiable policy, they can sell for cash. The flexibility of a Senior settlement or Life settlement permits policy owners to sell all or a portion of their life policies.
When the life policy owner sells own life policy, he or she transfers all rights and obligations to a new owner. The purchaser of the policy will then become the new owner and the new beneficiary of the policy and is then responsible for making all of the future premium payments. The new owner now collects the full amount of the death benefit when the insured dies.
Life settlements present a unique opportunity to the policy holder to extract the maximum possible value from an existing life policy and repurpose those funds for whatever financial needs may exist. Many people choose this option because the cash value of a life settlement generally exceeds the surrender value that would have been paid by the life policy.
Policies are sold for many different personal or business reasons. Below are some of possible reasons for considering a Life Settlement:
Personal:
1. The original purpose or need for the policy has changed or has diminished totally.
2. The Beneficiary of the policy is deceased.
3. Policy holder is chronically ill, selling current policy provides needed funds to cover financial burdens caused by illness. A Viatical settlement gives the ability to regain needed financial security.
4. Policy has not met the original illustrated values and premiums need to be increased to keep policy in force.
5. If policy holder is over the age of sixty-five, a Life settlement or Senior settlement maximizes the current assets by eliminating premiums and getting required funds that can be used today.
6. Insured person wishes to distribute the funds/ liquid assets as per his or her desire while living.
7. To make funds available for other investments like real-estate, stocks, bonds or to start a new business.
8. Divorce settlement has altered the need for life insurance.
9. Personal financial situation has gone bad and making premium payments is unaffordable.
10. Sale proceeds from Life settlements are needed to pay down loans or outstanding debt.
11. The policy owners current asset mix is weighed too heavily in life insurance.
12. A client wishes to invest in a more appropriate product, such as a lower cost survivor policy, single premium annuity for supplemental income, long term care insurance, long term care or other asset protection tools.
13. A family trust has eliminated the need for personal life coverage.
14. Policy holder need to fund an alternative healthcare that present does not cover.
15. Insured person has left an employer, so he or she needs to sell old group policy.
16. Policy was purchased to ensure the availability of funds to pay off a mortgage and the mortgage has been paid.
17. To take a long awaited vacation or to buy a luxury item that was never affordable.
18. When a policy is in danger of getting lapsed the policy holder can turn it into cash.
19. You can use life settlements to donate to your favorite charity or cause and feel much better about yourself knowing that you have done your part to make the world a brighter place.
Business:
1. Business owned policies those are performing below expectations.
2. Key person policy is no longer required due to retirement or change in business structure.
3. A policy purchased to finance a buy/ sell agreement is no longer needed after the business has been sold.
4. Bankruptcy of business has caused liquidation of assets.
5. Deferred compensation programs in business have changed or not required.
6. If you are a corporation, selling corporate owned life lets you regain back premiums paid on no longer needed policies.
Estate Planning:
1. A single life policy is no longer appropriate- a survivorship policy meets the estate planning requirement and 1035 exchange is avoided.
2. If you are managing an estate, selling your current life policy will help manage changes in estate size, eliminate premiums, and liquidate policies that are no longer needed.
3. A policy needs to be removed from an estate. The three year rule can be avoided by using the life settlement sales proceeds to repurchase a new policy out side
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4. There is a significant reduction in size of estate due to loss of net worth and less coverage is needed to fund the projected estate tax liability.
Charitable Organizations:
1. If charities can no more continue to pay premiums on gifted policies.
2. Proceeds of a Life settlement could result in a larger gift to the charity organization than the policy itself.
Non-Profit Organizations:
1. If you are a non profit organization, selling a gifted life policy provides funds that can be used now and also eliminates premiums.
Once a policy owner has absolutely determined that it no longer makes sense to continue holding a policy, Life settlement or Life settlement may be economically advantageous relative to surrendering or letting the policy lapsed.
This innovative wealth and estate planning tool removes the burden of expensive premium payments in addition to providing the lump sum cash settlement. This allows policy holders to get cash out of their life policy, in an amount in excess of the cash value of policy(if any), while they are still alive. To get the highest life settlements is to improve the quality of life during your retirement years.
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