If you are looking at ways to raise cash, one thing you may want to consider is a life settlement contract. A life settlement contract involves the selling of your current life insurance policy in order to receive equity from it now, while you are still alive.
There is a lot to consider when it comes to life settlement contracts and you should never enter into an agreement without first getting a true understanding of what such a contract entails. Additionally, you will want to analyze the pros and cons of such agreements and take a close look at your personal situation.
How A Life Settlement Agreement Works
In order to enter into a life settlement agreement it is extremely important for you to find someone to represent you during the process. You will want to make sure your rights are protected and that you receive fair compensation. Your best bet is to find an insurance agent or broker that works with helping clients enter into life settlement agreements.
Once you have found a professional to work with, you will then need to fill out paperwork to get the process started. Your application will require personal information like your social security number, medical information including your medical records, a copy of your life insurance policy will need to be included and more. Your broker will then take your information to policy providers where your data will be analyzed to see if you qualify for a life settlement contract and if you do offers will be made.
If you accept such an offer, then you will receive the dollar amount agreed upon. In return your policy will now be paid to the investor when you die, instead of to your previous beneficiary.
The Pros And Cons Of Life Settlement Agreements
Life settlement agreements are not for everyone. There are numerous pros and cons you will want to consider including the following:
- Life settlement policies offer the ability to cash in your life insurance and receive money from your investment while you are still alive.
- The money received can be used for anything you like.
- When you enter into a life settlement agreement you no longer have to pay premiums on your insurance policy.
- If you have a large insurance policy you may have the option to settle just part of it.
- When you enter into a life settlement policy you forfeit your policy and your beneficiary will not receive any money at your death.
- You may have to pay income tax on some of the money you receive.
- The life settlement company may contact your frequently for health updates.
- You lose all benefits attached to your original policy including the ability to borrow against the policy, liquidating your policy, etc.
How To Decide If A Life Settlement Agreement Is Right For You
Deciding whether or not to enter into a life settlement agreement can be a tricky decision and there is a lot to consider. You first may want to take a look at other options like can you borrow from your current policy or surrender your current policy for cash? These options may be more beneficial for some.
While a life settlement policy is not for everyone there are times when choosing one is necessary or just makes sense. For example, if you need to let your policy lapse because premiums have become too high, a life settlement agreement may be a great option. Also, if you have no beneficiaries to leave your policy to, a life settlement agreement may make perfect sense.