What Is a Life Insurance Settlement?
In the past, life insurance settlement policies only had two options: Either you could let it expire or give up the policy for the available cash value. Settlements now allow you to sell your policy to someone other than the life insurance company. When you settle your policy, the entity buying it acquires its financial interest. In summary, you will receive an amount of money that you can use immediately, and the buyer becomes the new owner of your life insurance policy.
What Are the Benefits of a Settlement?
When you decide to go with a life insurance settlement, there are a number of benefits, depending on your situation and policy. The money may enable you to pursue a life dream, give you retirement income and relieve you from the hassle of paying premiums. You might be able to subsidize your retirement assets and procure long-term care insurance in the event of serious illness.
What Are the Disadvantages of a Settlement?
There are a few cons to settling your life insurance that you might need to consider. Probably the most obvious one is that you’re losing a larger sum that could go to your heirs upon your death. If you have a large quantity of debt, your settlement proceeds might end up claimed by creditors. If you enjoy low-income assistance, you may need to ascertain if a settlement would interfere. Your life settlements could also be susceptible to federal and state taxes.
Depending on your circumstances, a settlement of your life insurance policy might be the ideal way to plan your retirement or provide for your long-term care.