If you need money and don’t need to preserve the death benefit, you may be able to sell your policy to an investor. These transactions, known as life settlements, have an unsavory past, but in recent years they’ve moved further into the financial mainstream.
Life-settlement companies buy life insurance policies for cash. They continue to pay the premiums, and they collect the death benefit when the insured individual dies. Life-settlement investors
image:
http://images.intellitxt.com/ast/adTypes/icon1.png
are primarily interested in buying cash-value policies or term policies that can be converted to cash-value policies. The size of the settlement varies, depending on the size of the premiums and the policyholder’s life expectancy, says Bryan Freeman, founder of Habersham Funding, a life-settlement company. The settlement amount is typically 12% to 25% of the death benefit, although someone with a terminal illness and low premiums may receive up to 60% of the death benefit, says Freeman.
Here’s an example, based on a recent settlement by the Lifeline Program, one of the largest life-settlement companies. A 73-year-old man had a universal life policy he purchased in 2003. The policy had a $2 million death benefit and cost him nearly $40,000 in annual premiums. He sold the policy to Lifeline for $515,000 -- more than twice its cash value of $250,000.
If you’re in your fifties and feeling fine, this isn’t an option for you. Brokers are primarily interested in policyholders who are in their seventies, or younger if they have a serious illness, says Darwin Bayston, executive director of the Life Insurance Settlement Association.
Read more at
Cash From Your Life Insurance-Kiplinger