Selling your life insurance policy is a valuable option. Even though selling is a reasonable option for some policyholders, there are still contingencies that you have to think about. When you sell your policy, you’ll receive an automatic cash payout that is extremely useful for families. If this sounds like something you’re interested in, then keep reading to explore more about the process of selling your life insurance to a third party.
What’s a viatical settlement?
Viatical settlements are an option that many pursue, but to qualify for this option you must have a terminal illness or another poor medical outcome. When you prove this outcome to a third party, they’ll essentially buy-out your insurance policy in return for an immediate cash value. As the policyholder, it makes sense to pursue a viatical settlement so that your loved ones are financially secure.
The cash payout that comes from buying out your policy is a really valuable asset for your loved ones to have. This way, they’re well-prepared to pay for things like wake and funeral expenses or costly medical bills that often accumulate for cancer patients. Once the policyholder passes away, the third party, like American Life Fund Viatical Settlement Company, will receive the return on their investment. This return that they receive is the death benefit of your life insurance. Though it may seem dismal, this sale of a life insurance policy is actually a reasonable and proactive step for those battling a terminal illness. In turn, by selling your policy and receiving the cash you need, you’re preparing yourself and your loved ones for whatever may occur.
What’s a life settlement?
The main difference between life settlements and viatical settlements is the qualifications. For a viatical settlement, you must be terminally ill to sell. On the other hand, anyone generally over the age of 70 is eligible for a life settlement. The way that the process works is somewhat similar to a viatical settlement. However, instead of selling your policy to a viatical settlement company, you trade your life insurance policy with an investor life settlement broker. This investor will then pay your insurance company monthly until you die. When you pass, the investor receives the death benefit.
Obviously, because there’s no judge on life-expectancy, this is a much longer investment option for brokers than a viatical settlement. Many people opt to sell their life insurance policies to investors because their investors will cover the premium payments each month that have become too high, so they’d rather have the cash surrender value. For other life insurance holders, simply need or want the cash immediately.
Other things to consider.
With both of these insurance selling options, it’s important to remember that there’s a lot to consider before you opt to exchange your policy. One of the biggest things to think about is how these payouts may affect your taxes. While the viatical settlement process generally avoids taxes, life settlements don’t. This means that even after your lump-sum payout, this overall amount will be added to your income. Unfortunately, this means it’s eligible for taxation. Considering that you or your spouse is likely the beneficiary in this scenario, you might want to set yourself up with a financial advisor to avoid any potential hiccups that might cost you in the long-run.
Depending on which life insurance settlement you qualify for, you should always weigh your options before committing to a third-party agreement. By relying on your research and assistance from experienced financial advisors, your life settlement process or viatical settlement process will run much more smoothly. This way, you can focus on spending time with those you love instead of stressing over financial worries.