subject: The Potential Upsides of Life Settlements [print this page] The Potential Upsides of Life Settlements
As with anything, there are upsides and downsides to life settlements. In this article, we take a look at the upsides of life settlements and what they mean to someone considering selling.
A life settlement is simply the decision to sell a life insurance policy before the person insured passes away or the policy lapses for a lack of premiums. The policies are usually sold by senior citizens and reap returns of anywhere from 10 to 30 percent of the face value of the policy, to wit, a sizeable amount of money.When considering positives of the life settlement process, the first is perhaps the most obvious. Selling the life insurance provides you with a bountiful haul. Let's consider a 65 year old man who has a variable policy with a death benefit of one million dollars. If we sell the policy for 20 percent, the revenues would be $200,000 minus any fees and costs. That is a nice financial boost for most investors.
The second positive is the cost cutting that comes with a life settlement. I don't have to tell you that premiums become very onerous as you age. When a life insurance policy is sold through this process, the buyer takes over the premium payments and you gain financial flexibility in your personal budget.
A third major positive is the move from an illiquid asset to a liquid version. A life insurance policy really has no usable value to you. Even policies with cash value in them only allow for loans of fairly pitiful amounts. All and all, a life insurance policy is really on a major benefit to your spouse and heirs. By selling it, you bring that benefit forward in time in a manner that lets you use and enjoy it.
Does this mean you should rush out to sell your policy? Of course not. As with any major financial decision, you should sit down with a qualified financial advisor to weigh the positives and negatives of the deal.
