How To Offload Your Unwanted Insurance
By Space Coast Daily // August 5, 2019
Determine the Life Settlement Type You Need
It’s encouraged that young professionals start putting in funds for their retirement while they’re still at their prime working years. Insurance helps in the exponential growth of your savings by pairing the small amount you put in every month or year with compound interest.
There are different types of insurance policies for retirement, health, and other safeguards in cases of emergencies. You may have several of them, and your employer may also have bestowed you with a policy.
While there’s nothing wrong with having all of these to prepare for the future, there are reports that it may be better to sell unwanted insurance. This is because of the overwhelming inflation rates in today’s economy, which renders your savings lacking compared to the expenses that await you in the future.
The process of selling your unwanted or unnecessary insurance is called a life settlement. It pertains to the legal sale of your current life insurance policy to an institutional investor for more than the stipulated cash surrender value, but lesser than the net death benefit.
Companies such as https://qlifesettlements.com/ make the process more straightforward with tools like a life settlement calculator, which you can use to estimate your policy’s resale value.
If you’re thinking about selling your insurance policy so you can use the funds for your daily living or medication, here are some tips you should know about:
1. Know the Rules
Senior citizens typically aged 65 years old and above are the ones eligible for life settlements. Moreover, investors may only buy policies that have been with you for at least two years since it coincides with the length of a standard contestability clause. Your life expectancy, too, should be two years or greater.
Additionally, the type of insurance policy you hold must be whole or universal. Otherwise, it should be a term policy that can be converted into a permanent one without having to prove insurability. Some investors also prefer policies with a minimum death benefit of 250,000 USD.
2. Determine the Life Settlement Type You Need
There are different types of life settlements. For people with terminal illnesses, selling their policies for a viatical settlement is ideal. Meanwhile, for healthy senior citizens, you can choose between hybrid, traditional, or retained death benefits.
Here’s an in-depth look at the different types of life settlements for those with longer life expectancies:
- Traditional – With this setup, the investor or investment company enjoys full ownership of your policy. They can put themselves as the full beneficiaries and shoulder the continuation of paying the premiums. Moreover, since you’ve already relinquished possession of your account, your beneficiaries won’t be getting cash from the policy when the insured person passes away.
- Retained Death Benefits – This type transfers the responsibility of paying the premiums to the investor, but you won’t be receiving any cash when the transaction is completed. Instead, the beneficiaries you named in your account will still get a portion of the benefits along with the investor. It’s ideal if you’re having a difficult time paying for the policy, but you still want your loved ones to receive a death benefit.
- Hybrid – It’s a combination of the traditional and retained death benefit setup to work around what seems best for the seller.
3. Identify Possible Deductions
You should know if the cash payout in exchange for your insurance policy will be subject to income or capital gains taxes. This way, you’ll know the exact amount that you can take home and invest in stocks or other lucrative ventures.
Make sure that you consult with your legal counsel, accountant, and financial advisor before deciding on a life settlement plan. You should also consider the debts that you haven’t fully paid yet since creditors may be able to claim a portion of your reimbursement legally.
4. Research Diligently
Know the estimated resale value of your insurance policy by asking for several offers from various investment companies. This way, you can get a holistic idea of the market price for your policy. A 2010 report by the US Government Accountability Office (GAO) found that sellers at the time received approximately 13 to 21 percent of the value of their policies.
It can be intimidating to think about selling your insurance policy since you signed up for this service to ensure that you have enough money for retirement. However, with the inflation rate today, your savings may no longer be enough. Fortunately, you have the option of getting life settlement to gain access to the funds you need for your living or medical expenses right now.
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