Policyholders may at some point wish to sell their life insurance policy as their needs change or if they experience a dramatic life event. Or, perhaps the policy premiums have become too costly.
When an owner of a life insurance policy wishes to sell his or her policy in exchange for a lump sum of money on the secondary insurance market, this is known as a life settlement.
Several types of policies qualify for this conversion:
Universal life insurance policies
This type of policy combines permanent insurance coverage with more flexible and more affordable premiums. Universal life insurance policies accumulate cash value and this value increases as the policyholder pays its premiums.
Whole life insurance policies
Whole life insurance policies stay active for the policyholder’s lifetime, as long as the policyholder pays the premiums, or until the policy’s maturity date. Typically these premiums do not increase and are usually based on age.
Variable life insurance policies
This type of policy offers protection plus an investment portion as well. Variable life insurance has a cash value account, which is invested in a number of sub-accounts that accumulate value over time.
Term life insurance policies
This type of coverage provides life insurance benefits for a specified period and does not accumulate cash value. Once the policy expires, the owner must decide to renew or discontinue the policy.
This type of policy covers two individuals and is a variable insurance. After both individuals are deceased, the beneficiary receives the policy’s benefit.
Group life insurance policies
So long as group life insurance policies are able to be converted, this policy is eligible. Often, when workers exit a company, they are able to purchase these types of policies.
In considering these variables, it should be noted that any type of policy should have been in place for at least two years and cannot contain a clause restricting the transfer of the ownership rights of the policy. Obviously, each involved party must agree to the transfer before it can be completed.
If you or someone you know owns one of these policies and are interested in the life settlement option, contact us. We are happy to discuss with you the benefits of the life settlement option.Read More