Life insurance is quite important. It can provide your loved ones a relative stable life after your death. My uncle once bought a life insurance, too. Life insurance policies don’t make any payout when he’s still alive. Therefore, one day he decided not to pay for it anymore and wanted to receive an upfront settlement value. The same thing could happen to you or your relatives.
What to do? Continue reading and learn more about life insurance buyout.
A life insurance buyout is often called life settlements. If the policyholder doesn’t want it anymore, he can sell the insurance for a cash payment.
Usually, the buyer will be an institutional investor called a life settlement provider. This is a company who arranges sale process. Remember to find a licensed one.
The life settlement company will evaluate the policy illustration and other conditions. If your policy is thought to be economical, the company will offer you the settlement for your life insurance policy. The average settlement can be about 20% of the death benefit.
After that, you don’t need to pay the annual premium – the life settlement company continues to pay. For insurance companies, they don’t care about who is the beneficiary, as long as they receive premiums regularly.
Since the payments continue, the policy remains valid. So, when the insured, in this case is you, eventually passes away in the future, the death benefit belongs to the life settlement company.
Sounds appealing, right? But wait, not everyone qualifies for a settlement. Whether you are qualified for the settlement depends on two main factors, your age and the policy size.
It is required to be at least 65 years old to sell your life insurance policy. But often 65 is too young. Most people become good candidates when they are at their 70s. the older you are, the better for the life settlement companies – they want money as soon as possible. If you have a life expectancy less than 4 years, it doesn’t matter how old you are.
The minimum policy size is $100,000. The larger your policy is, the more valuable it is to the company.