Many policyholders go back and forth on whether to bring their family in on their decision to sell their life insurance policy. This is because policies almost always benefit the beneficiaries of the policyholder and selling it will eliminate the funds provided to them upon the death of their loved one. You should strongly consider the pros and cons of life insurance settlements before deciding whether or not to advise your family member on selling their life insurance policy.
Pros of Life Insurance Settlements
Settlements Provide Cash Now
Considering the time value of money, receiving cash now is always more beneficial than receiving the same payment a few years from now. Life settlements offer policyholders the opportunity to gain a respectable cash payment in exchange for their policy. Once transferred, they will no longer be responsible for their life insurance policy and thus, will not receive the death benefit upon passing.
Settlements Are Better Than Defaulting
Defaulting on your life insurance policy will cause it to lapse, rendering it essentially useless. If you or a loved one is in a position where they can no longer pay the monthly premiums, selling their policy will not only free them of a recurring monthly expense but will also give them a lump sum payment in exchange for it. Of course, receiving funds for your policy is always better than defaulting and receiving nothing.
Settlements Can Help Fund Long-term Care
Trying to figure out how to fund long-term care for elderly parents or loved ones can be a point of contention for family members. Long-term care services for older people are not cheap, especially if they face physical or mental conditions that may require extra attention from caretakers. Funds received from a life settlement can certainly help finance these expenses.
Life Insurance Settlement Tips
#1 Understand the Process
Selling your life insurance policy is a little complicated and comes with a ton of bureaucracy and paperwork. Doing the necessary research on the entire process will save you and your loved ones some time when you decide that you may want to complete a sale. This research will shield you from life settlement scams and malpractices that are not allowed under federal and state regulations.
#2 Consider Hiring an Advisor
If navigating bureaucracy and completing multiple pages of paperwork does not sound ideal, you may want to hire a licensed advisor. They’ll give you an idea of what your policy may be worth and will guide you down the steps toward selling it. Advisors are also there to answer any questions or concerns you may have.
#3 Find a Reputable Provider
A broker or organization will be able to find reputable investors for your policy. However, you’ll want to interview them and ask several questions to ensure you’ll receive the best offers for your policy. Asking questions about their track record for securing offers and what you should do to get a higher offer are all valid questions when choosing a reputable broker. They will take a commission on the final sale, so understanding how that is structured is key too.
#4 Make Sure to Source Multiple Offers
Like with all financial decisions, it’s always best to shop around until you get the best price. Sourcing multiple offers ensures you won’t sell yourself short and that you’ll be getting the maximum amount possible for your policy. It is never a good idea to accept the first offer presented - no matter how long it may take to receive a second.
#5 Get your Paperwork in Order
Filling out necessary paperwork is one of the more vital aspects of the life settlement process. Your broker will be able to provide a copy of your specific life insurance policy, but they will also need medical records and history to provide you with the most accurate offer. When in doubt, an independent advisor can definitely assist you here.
Preparing to Make a Final Decision
Life settlements need to be a decision made amongst trusted family members. However, many policyholders are unaware of the entire industry altogether. Consider the pros and cons of life settlements, as well as these tips when advising your loved ones on whether or not selling their life insurance policy is the best option for them.