Life Settlements

How to Go About Life Settlements

When purchasing an insurance policy, it is important to ensure that you are dealing with a broker that can provide insightful advice on the choice of the policy. At times, people buy a life insurance policy and with time, they realize that their needs have outgrown the life coverage. It is also possible that the current insurance policy has high premiums and you would like to move to a life insurance with lower premiums. Life settlements offer you an easier option to sell your life cover to a third party instead of going back to the insurance company.

Life Settlements

Life settlements are beneficial to the life insurance holder for various reasons. First, selling the coverage to a third party enables the holder to get higher value than the surrender value that would have been obtained from the insurance company. Secondly, it allows the insurance holder to get a one-time or lump sum payment in cash from the purchaser as opposed to periodic payments from the insurance company. Third, transfer of a policy is an investment that allows the holder to divert money to more lucrative forms of business or securities.

The business of selling a life insurance policy is a fast-growing and lucrative industry since its inception few years ago. Just like in any other emerging industry, people make decisions without adequate knowledge of the transactions and risks. There are also other people taking advantage of this information asymmetry. Therefore, it is important to ensure that you have all the facts before getting a raw deal for a policy that you have paid premiums for over the years.

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Old Couple  To avoid getting a raw deal, it is advisable to engage services of a reputable broker to draw a proper life settlement contract. The broker will solicit and negotiate the settlement contract for a fee. Ensure that the broker is licensed to offer insurance brokerage services, and more specifically in life insurance. A broker enables you to get even a better deal because the company will shop to numerous providers just as a broker solicits various buyers for a home. Even though the broker solicits for bids, from different providers, the best deal comes in when there is collaboration between the client and the advisor (broker).

Working closely with a broker ensures that you are advised adequately on various contractual terms such as offer price, privacy requirements, stability of financing, net income after deducting commissions and other provisions that may arise. The advisor will also give you adequate information on the legal requirements and procedures touching on life settlements since they vary from one state to another. These legal provisions touch on privacy, reporting and disclosure, whose violation can lead to heavy fines for the brokerage firm.

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Once the investor purchases the policy and gives you the payment, he or she will be liable to pay all the future premiums for the policy. Compensations for the settlement vary considerably according to the terms of the policy. Since some of the processes involved in the settlement are complex, it is good to engage a broker to assist with issues of disclosure and privacy.

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