Life Settlements: What& Why?

Life Settlements: What& Why?

Are you new to the concept of Life Settlements?

If yes, then you are in the right place.

This article is aimed at providing you with all the information on life settlements.

A life settlement is a process of selling the life insurance policy to a third party for one-time cash payment. It is just like “viatical settlement.” Usually, the purchaser of the life insurance policy is an institutional investor who then becomes its beneficiary and has to pay the premiums.

The history of life settlement market is very intriguing. It all began in 1911.

The life insurance policy was declared as private property by the United States Supreme court in the case of Grigsby vs. Russell. The court recognized the right of the policy owner to assign his/her life insurance policy. The Justice of this case- Justice Oliver Wendell Holmes declared that a life insurance policy is similar to any other property. Hence it can be transferred by its owner without any limitation.

The life settlement market grew in the 1980’s during the AIDS epidemic.

Due to lack of money, the terminally ill policyholders decided to transfer their insurance policies as they no longer needed it. Thus, emerged the “Viatical settlement” industry.

A viatical settlement involves a terminally or chronically ill person (with less than two years life expectancy) who sells his or her existing life insurance policy to a third party for a one-time money settlement.  The third party becomes the new owner of the policy, pays the premiums and receives the full death benefit when the insurerpasses away.

It is possible to cash in life insurance while still alive.

One can take out a loan from the life insurance policy’s accumulated cash value. These loans accumulate interest charges.

The owner of the policy can also withdraw a certain amount from the cash value which may, in turn, affect policy premiums and the death benefit. He/she can also surrender the policy which releases all the cash value.

The policy owner can also sell the policy by a process called a life settlement. These policies are brought by investors who then have to pay the policy premiums and are eligible to all the benefits resulting from the policy.

A person who is suffering from chronic illness and terminal illness can use the value of the life insurance policy. They can handle up to 50 percent of the cash value for their health issues.

These techniques can help one to deal with the financial crisis with ease up-to some extent.

A policy owner can decide to choose a life settlement if he/she cannot afford to pay the policy premiums, if the policy is no longer needed, or if money is required to pay for medical expense or some personal need.

Life settlements are crucial and must be chosen wisely. All terms and conditions of the policy must be read and understood carefully to avoid any misunderstandings and last-minute hassles.

Hope that this article gave you a basic idea about life settlements. Thank you for reading!

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