Simply put, a life settlement is the sale of an individual’s life insurance policy to a third party at a price higher than the cash surrender value of the policy. For many, a life settlement provides a welcome influx of cash, unlocking opportunities to improve medical care, address specific financial concerns and control expenses while on a fixed income. Some even use the opportunity to make memories with family, on trips of a lifetime or with meaningful gifts of time and resources.
Life settlements, and the market that supports them, have been around for over 25 years and have gone a long way towards tipping the balance of power back towards the consumer when it comes to life insurance. Many financial advisors and estate planners are still unaware of the opportunities life settlements can provide, but research (and thousands of satisfied consumers) can attest to the power of these financial transactions.
WHARTON RESEARCH STUDY FINDS POSITIVES IN LIFE SETTLEMENTS
A 2002 academic study performed by Neil Doherty and Hal Signer at the University of Pennsylvania’s highly influential business school, the Wharton School, highlighted the potential for life settlements to make a significant positive impact for consumers. In a paper entitled “The Benefits of a Secondary Market for Life Insurance,” Doherty and Signer found that “…life settlement providers paid approximately $340 million to consumers for their underperforming life insurance policies.” Simply put, the emergence of a market provided (and continues to provide) policy holders with an option to better control their financial situation.
WHY DO INDIVIDUALS CHOOSE LIFE SETTLEMENTS?
Reasons for choosing to sell a life insurance policy are varied, but many fall under a few key categories and/or correlate with specific life events.
Fund Assisted Living or Home Health Care
The cost of care as we age is an often unplanned for expense. A life settlement can help fund your care or for that of a loved one including facilities, medical expenses, home health and hospice care.
Relieve the burden of monthly premiums
After a certain age, term life insurance premiums become unmanageable for people living on fixed incomes. That is one reason so many policies lapse each year rather than reaching full payout. Imagine not having to pay those premiums every month.
Get back money from past premiums
Life settlements enable you to recover some of the money you’ve paid in over the years instead of simply letting the policy go.
Give gifts to family
A life settlement provides you with the opportunity to build fond memories with your loved ones. Take the entire family to Disney World. Buy an RV and tour the nation for the summer with grandchildren. Take your children to see the country of their ancestors.
Emergencies happen – even after retirement. Sometimes people need to liquefy assets fast in order to gain access to cash. In these instances, life settlements can provide a quick and large influx of cash.
Life settlements are only taxed on the amount above and beyond what you’ve paid in premiums, and even that is taxed at regular income tax rates rather than as capital gains. Consult your tax professional on your specific tax situation.
WHERE DO I BEGIN?
If you are over 65 and have an existing policy you no longer need, contact Beco Life at (443) 379-0190 or complete this form on our website. One of our Life Settlement experts will contact you to discuss the specifics of your situation and offer you a free quote on your existing policy.