Are Life Settlements a Good Investment?
Jun 23, 2021
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There are many ways to save for retirement beyond the traditional IRA and 401(k) accounts. While those are considered the gold standard, the rising cost of living and an unpredictable economy has millions of Americans fearful about what their senior years will look like. As a result, they're turning to other forms of investment, like life insurance settlements, to secure their financial futures.What Is a Life Settlement?
Life settlements date back to 1911 when the Supreme Court ruled in favor of Dr. A.H. Grigsby, who was being sued for the death of a patient whose life insurance he had purchased one year prior to his death. The ruling declared that people have the right to sell their life insurance policies, change their beneficiaries, borrow against their policies and use their policies as loan collateral. A life settlement allows you to sell your life insurance policy to a third-party for more than its surrender cash value. This means you can profit from your coverage while you're alive and use the funds to care for yourself after retirement. This money could go toward health costs, living expenses and anything else you want to put it toward.
How Do Life Settlements Work?
You can sell your life insurance through a company like Dawn to receive the greatest cash value for your years of investing in premiums. The third-party buyer not only pays you for the policy itself but also agrees to pay existing premiums that may remain on the policy until you pass away. After your death, they will receive your death benefit. Many people who would otherwise cancel their coverage because they no longer need it turn to settlements as a lucrative alternative.
However, it's also crucial to be aware that this is a highly competitive market, and there are many buyers and institutions that may exploit or take advantage of people with deteriorating health or seniors with terminal diagnoses. That's why research is so important. You should only sell your life insurance policy to a company you can trust. The money you receive is yours to spend however you want. This can go toward your medical bills, paying off debt, paying for your grandchildren’s college tuition or retiring in another country. The cash belongs entirely to you, and how you spend it is left to your full discretion.
How Do I Qualify to Sell My Life Insurance?
You must have held coverage for at least two years, and the policy must be worth at least $100,000. Generally, you must also be at least 65 years old. Although there are some cases where you can sell a policy younger, the primary audience for a settlement are seniors whose policies would otherwise be wasted, terminated or lapse.
Whether you want to cover additional living costs or sell your policy to enjoy more financial freedom while you're alive, settling can be a good form of investment. As with any financial decision, you should thoroughly research the pros and cons to decide whether it's the most beneficial choice for you. In addition, you should carefully research all companies, brokers and potential buyers to make sure that you're only selling your policy to a reputable agency.
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