Life insurance is one of those things that we all never want to think about using. However, even though you might not like to think about the moment when your loved one will have to tap into your payout, it’s good to know that you have some security in place – just in case. The only problem is that it can be difficult to figure out what kind of protection you need.
You might even find yourself wondering whether it might be worth selling your policy for a cash bonus, to help in times of financial difficulty. A life settlement is a term used to describe what happens when you sell your insurance policy to a third-party for a quick cash payment. Rather than your family getting the benefits of your contract when you pass away, you can choose when you need to receive it.
How Do These Sales Work?
A life settlement often gives you access to more than you would get for the surrender value of your policy, but less than what you might earn from the actual death benefit. After a sale, the person who bought the agreement from you, will become the beneficiary, and you don’t have any premiums left to pay. People sometimes choose this option because they can no longer afford the premiums on their insurance, or they need extra cash to pay for an emergency.
There are even specific kinds of purchase available depending on your situation. For instance, a viatical settlement refers to an arrangement where someone sells their policy when they have a terminal disease. With a viatical strategy, the rate of return is difficult to know, but you do get some crucial cash to help you arrange for things like funeral expenses and critical costs before a person passes away. Individuals facing serious health crises might choose these strategies so that they can get some much-needed cash to pay for things like medical expenses too.
Are Life Settlements a Good Idea?
There’s no one-size-fits-all approach to getting the most out of insurance. Some people to sell because they don’t want to pay their premiums anymore and would prefer to have the cash available to them now. Failure to pay premiums can sometimes lead to an owner being offered a smaller cash surrender value. There are also situations where it might make sense to sell off an agreement because it’s no longer needed. There are times when a person might decide to join a partner’s life insurance program for a joint payout, which means that an old payment schedule isn’t always necessary.
In emergency situations these payments can also offer a useful source of emergency income. When unexpected events arise, such as the illness of a family member, an owner of a policy may decide to sell it for cash so that they can cover the expenses without having to worry about the costly interest rates on a traditional loan. Everyone has different requirements. The best thing you can do is do your research and make sure that you’re getting a good deal before you sign on any dotted line.