Life Insurance Settlement
A life insurance settlement enables the holder of a policy to cash out the policy early in order to provide for some financial need deemed more important than a death benefit. This kind of transaction occurs when the policy has cash value and the insured receives a payout somewhere between the present day cash value of the policy and the death benefit. The settlement is different from a viatical in that the transaction usually occurs between two and twenty five years of the insured's expected death. The kind of policy that is eligible for an insurance settlement or viatical is a convertible term insurance policy, a whole policy or a universal life type. All three of these will have cash value, and on this value is an agreement struck for cash now.
There are some important factors that go into the making and agreement to a life insurance settlement. The first is the life expectancy of the policy holder. When the buyers of these policies consider purchasing an insurance contract, they must calculate how many years of premiums they will have to pay before receiving their money from the death benefit. Buyers will count on the accuracy of actuarial tables that can, often with great certainty, gauge how long a person will actually live. Yep, this is gruesome stuff. The reality is that no matter how long we live, when it nears the end, life has appeared to have been on a jet hurtling along at nanosecond speed. For those who love and serve God, there is a comfort in knowing He is above all of this. "For a thousand years in thy sight are but as yesterday when it is past, and as a watch in the night." (Psalm 90:4)
Who are the people that provide the money for a life insurance settlement? Many of them are actually older persons looking for a good return on their dollar. Also there are larger institutional types of buyers looking for higher return than their corporate investments are making. The minimum face value on a coverage agreement under consideration is usually at least a quarter million dollars. Typically, the insured usually receives about three times the amount of the cash value. For those who can no longer afford the policy premiums and who might let the policy lapse, or for those who just don't need death benefits, the idea of a life insurance settlement can be an important option to consider. However, in these types of transactions, the money received may be taxable, minus the premiums paid into the policy, so it becomes important to check with a tax expert for all the implications.
The selling of a premature life policy can be known as a viatical. They began in earnest in the 1980's when investors began buying the insurance policies of AIDS patients. The viatical is different from a life insurance settlement in that the agreement is brokered up to two years before the insured's death. The selling of a viatical usually occurs when a terminally ill person or his representative, contacts a broker who will indentify and engage a prospective buyer. The prospect of being able to turn a fairly quick profit is quite compelling because it often comes with an accompanying sad tale of a dying person needing money and the investor feels he is really accomplishing two pretty cool things. In some cases the story is really true and in many it is not. Often a duped investor ends up having to pay premiums for a very long time on the policy or will not get back his or her investment.
Because the selling of viaticals is a risky business, many states have begun licensing the companies that broker out these policies for profit. Through the state insurance commissioners, these states can keep close tabs on the very tempting idea of defrauding investors, many of whom are senior aged. The humanitarian side of the viatical investment plays on the heartstrings of many older adult investors who are looking for a way to make their money work for them. Selling policies and receiving a life insurance settlement is in no ways illegal and is done quite routinely across the country. In times of economic turmoil, more and more holders of coverage plans may turn to this cash now solution. But one must be very careful and make sure the situation is what it appears to be.
No matter what circumstances surround the unfolding of a life insurance settlement, the process all coming to fruition may take a number of months. Finding a broker who can locate a potential buyer can be done on the Internet, but great care should be taken in finding one of integrity so look carefully into the background of the broker and get references. Then follow up and contact these references and ascertain their experience with the broker as well as the entire process. It is important to know that this process can be very invasive and a number of private information bits of data will have to be revealed. Even before a person qualifies for a life insurance settlement or viatical, personal information will be passed on to people the insured and family don't know and that can be quite disconcerting at times. If a person wants to keep a portion of their life insurance policy for final expenses or to pay for estate taxes, that arrangement can be made with those buying the policy.
Life Insurance ProvidersLife insurance providers provide an important insurance service for a family or business. The many companies offering death benefits for survivors seem to stretch on page after page in the results and for the first time buyer of such a policy, there can be a lot of confusion. Life insurance, or maybe better called a living policy, is not for the one who dies, but rather provides the living survivors an opportunity to maintain at least a reasonable, and sometimes improved lifestyle. It can pay off credit card debts, mortgages, student loans and other cumbersome financial burdens. And once the insured person has secured such a living policy, he can have some piece of mind that his passing will be grievous but not worrisome. The right kind of living policy truly can be the gift of lightened loads for those carrying the loss of someone close.
When choosing one of the many life insurance providers, it's important to remember that there are some very good ones and some that aren't as solid in reputation. There are in fact two thousand life insurance providers offering to sell their brand of living plan to willing buyers and winnowing the wheat from chaff can be a daunting task. But because there is no FDIC coverage for living policy investments here are some things to keep in mind regarding life insurance providers. The most important asset that a living policy company can have is money to back up their promise to pay off at the right time. When the country goes through hard economic times and many companies are cash strapped, it is best to look at the rating of the company you are considering. And when the country is booming, this is still a good idea. There are several top rating companies in the country that are independent and unbiased and can give the prospective customer a good look at the financial strength of companies offering living policies.
Knowing what products a company sells is also a key to getting the best deal for yourself and the ones who are the beneficiaries of the plan. The life insurance providers' industry isn't a complicated industry when it's boiled down to the base offerings they can make. Living policies are either term, whole or a hybrid of the two, often called universal. Term policies have often been called "pure insurance" meaning that a person is only paying for a death benefit and is not also trying to build cash value for the future. That is the point of the whole life policy; it pays a death benefit based on the face value of the agreement, but the owner of the policy is also building cash value, making the premiums quite a bit more expensive than the term type of plan. Finally, insurance providers' universal type of policy is a mixture of the two others, meaning that it does build a little cash value but pays the full face amount in the event of death. The universal type falls in between the other two in premium costs.
If one chooses to use one of the life insurance providers from online, you probably won't have the opportunity to choose an agent. But many times it really helps to be able to sit down with someone and ask questions until every answer has been given, and you know that to that agent you are not a name on a monitor. If the insurance providers under consideration are around town where you live, the best thing to do is ask around and see which agents friends and family use. Seek out someone who is licensed, and the customer should know as much as possible about the company before making the final choice. And remember, a good agent does want to make the sale, but more than that, wants to provide the customer with the best options for his financial situation and coverage needs. The Bible, God's word, is a faithful and trustworthy guide for all of life, especially in the dark times. "Thy word is a lamp unto my feet and a light unto my path." (Psalm 119:105)
Good or bad, an agent wants to make money. He or she is compensated by the commissions made on each policy sold. A term policy has a fairly low commission, because it is only insurance and nothing else. Life insurance providers want agents to sell the more expensive universal and whole life policies because they produce more revenue for the company and provide larger commissions. The truth is that whole life and universal type policies pay very low interest rates on invested money in the plan, sometimes not much more than passbook savings rates. That is why financial experts seemingly universally agree that term insurance, along with a good personal savings plan is much wiser decision than loading up on a large universal or whole living type plan.
Life insurance providers live by the actuarial tables that provide fairly keen insight into how long a person will live. Given the age, occupation, weight, medical conditions and medication a person uses, actuaries, or those who work on these kind of gruesome details, can tell quite accurately how long a person will live a natural life. The cost of the insurance is then hinged on those details, with the company in essence betting on the person living the full length of the plan or at least until the company has gotten a profit from the premiums. A living indemnity policy is usually not difficult to obtain in the earlier years of a person's life, so securing enough coverage at least until the children are adults is a good idea. The prices are low and the peace of mind can be fabulous.