The decision to sell your life insurance policy is a very complicated one, it happens that the unpredictability of life makes people decide to collect life settlement, either to foot an expensive medical bill, long-term care, fund retirement, or have access to cash. For some, it is the inability to afford to pay the premium, or they simply just think that the need for the policy has fizzled out.
These are valid reasons for selling your life insurance policy. It is not easy to fund a chronic illness, and this is why some people want to sell, but there are some details you need to be aware of before selling your policy.
Holders that want to sell their policies can approach a provider (the life insurance settlement company) or hire a licensed life settlement broker to act on their behalf.
Nonetheless, getting to sell your insurance policy is hinged on some elements like the ones discussed below.
Although most insurance policies are eligible for a life settlement, the most common policies are term, whole life, permanent, universal, and variable. These policies are convertible to a life settlement, including term life insurance. Not to forget, your premiums on the policy must be up-to-date.
The type of policy you are selling can impact eligibility for selling and the size of the payout as well, this is why qlifesettlements.com and other providers offering life settlement tend to evaluate policies on a case-by-case basis.
Ownership and Age
Some U.S states have life and viatical settlement regulations, this means you are susceptible to waiting periods or other restrictions before you can sell your policy to a provider.
In certain states, you have to wait for your policy to be at least two to five years old before you are eligible to sell to a life settlement provider. Some states make it easy for you to sell your policy for a viatical settlement if you are terminally or chronically ill. In others, you are only eligible to pursue a life settlement when you are over 65 years and have not been diagnosed with a chronic or terminal disease.
Fees and Commission
This is a natural order of process when you attempt to collect a life settlement, if you want the best deals, you will need consultants and experts to help you navigate the available options. You will need to go for medical checkups to ascertain your current health state at the time you want to sell the policy, and for full disclosure purposes to your preferred provider.
Financial advisors or tax experts are important to help you re-evaluate your tax liabilities before and after your payout. Also, life settlement brokers are available to help you get the best deals from providers and they must be paid their due which goes upwards of 20% or more of the entire payout. These are expenses you should consider before deciding to sell your insurance policy.
As a general rule, you do not pay federal income tax on viatical settlements. However, it is different for a life settlement as you will have to pay taxes on the payout, if it generates more cash than you paid in premiums, it becomes a taxable income.
The tax on life settlement may be unfavorable to you in the long run, hence you may need to consider other options besides life settlement.
Eligibility For Financial Assistance
As you are considering payout for life settlements, be reminded that there are eligibility rules. For instance, you could lose your eligibility to get medical financial aid or other programs when you decide to take that settlement offer from the provider.
The life insurance policy was bought to offset expenses for your family and loved ones, you could be selling it to cover your health needs but that leaves them open to other vulnerabilities because they would not be getting any death benefit from your policy after your demise.
You can consider borrowing from the policy or use accelerated death benefit options but you may need to speak to your insurer to get full options on how you can keep your death benefits for the sake of your family.
As a life insurance policyholder, there are mandatory disclosure laws in some states that make it obligatory for insurance companies to inform policyholders that are unable to pay their premiums or considering a relapse (where they forgo certain amounts of their money to the insurer) that they can pursue a life settlement.
You may not be considering life settlements but in a situation where it is a viable option, you have to man up and take it.