Life Settlement

By: Nick Baldwin

Recentlyyou may have been hearing more and more about life settlements and wonderingwhat are they? Life settlements are a new way for you and your client to lookat a life insurance policy. Some can be transformed into an unexpected sourceof income, freedom and flexibility, all for your enjoyment, while your clientsare still alive. A vibrant secondary market for life insurance policies ispopulated by major institutional investors searching for diversification ofinvestment options has come into being. That means that hitting in yourclient’s safe department box or bottom drawer may be an undervalued asset.

Lifesettlements are relatively new to the life insurance marketplace. Untilrecently policy owners of unwanted coverage had limited alternatives: they letpolicies laps or surrender them for cash value. But now the insurance carrierno longer holds sole control over the options clients have with their lifeinsurance policies. Clients may now be able to sell their policy in thesecondary market for far more than the cash surrender value the life insurancecarrier would offer. Life settlement empowers policy owners to view lifeinsurance as an asset rather than an as an expense. When a life settlement isused policy owners receive market value for their life insurance policies andno longer have an on going premium commitment. As such, life insurance hasbecome an important financial tool for managing investment portfolios.

Who is acandidate for a life settlement?

Noteveryone should sell their life insurance policy, but it is a good idea foragents to help their older clients evaluate a life settlement as part of wealthmanagement strategy. Life insurance is a valuable product and serves animportant role in one’s financial portfolio. Often times, however, people’sneeds and circumstances change, while policies don’t. For those who no longerwant to maintain coverage or for whom premiums have become burdensome, lifesettlement may provide substantial benefits.

When thepolicy is no longer needed the life settlement marketplace offers an importantalternative to cashing in or letting a policy laps. Outlined in this articleare the situations that may create an opportunity to reconsider the necessityof a life insurance policy:

  • A safety net is no longer needed due to lifetime wealth accumulation, the maturity of children or other reasons
  • The policy owner is over insured or wishes to dispose of the existing policy in order to execute a more appropriate one
  • Tax law changes have reduced the needs to subsidize state taxes
  • A family or a medical emergency arises
  • Insurance policy premiums have become unaffordable
  • Business loan secured by the policy has been repaid
  • Stock market volatility has diminished retirement income
  • A need exists to find a long term care program

The ideallife settlement candidate is a person over age 65 who no longer requires adeath benefit of a life insurance policy. In fact, those who choose lifesettlement are usually individuals whose ability has brought them a certaindegree of affluence. But any policy holder including individuals, corporations,charities or trusts may sell any life insurance policy including group and termpolicies. Policies are sold to qualified buyers for the present value of thedeath benefit. The buyer maintains the policy paying premiums and eventuallycollecting death benefit.

In generalFree Web Content,life settlement is a new way to interpret life insurance. It is also a way tocut expenses or to improve you investment portfolio and start enjoying liferight away.

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