When you sell your existing life insurance policy to a third party in exchange for cash, you call what you get through the transaction a life settlement. Since so many life insurance policies remain unclaimed and the surrender value for a policy would be too low, life settlements have grown in popularity in the past few years. However, the market is still growing and expanding, which is why many policyholders know the term ‘life settlement’ but don’t exactly know the nuances of it.
When you plan to get a life settlement while selling a life insurance policy, you have to know that the whole process proceeds in a very systematic manner. Before jumping to get a life settlement, you have to do a bit of homework so that you have no chances of being fooled or being offered lesser than what your policy deserves.
This is why you should choose to work with a life settlement providing company that helps you navigate the whole process and get the best deal. However, do your research and try different companies to see what amount they offer. Once you’re done with the first step (as given below); you would be able to figure out what your policy is worth. Based on that, you can select a life settlement company. Here’s a list of steps involved in selling a policy for a life settlement.
SEE IF YOU ARE ELIGIBLE
When you plan to get a life settlement while selling a life insurance policy, the first concern you need to address is whether or not your life insurance policy qualifies for a life settlement. When you go to a life settlement providing company, they would first want to find out if your life insurance policy is eligible for a life settlement. Based on its eligibility, life settlement providers quote a price.
Companies mostly check if you’re above the age of 65 and if your life insurance policy is worth $100,000 of the death benefit. Besides that, the company also checks what kind of policy you have, since only a few types of life insurance policies qualify for a life settlement. There are a few more criteria that help to evaluate if or not your policy can get you a life settlement.
When your life insurance policy qualifies for a life settlement and the provider quotes a price, you’re free to take it or walk away. There is no compulsion that upon getting a quote, you have to sell your life insurance policy to that provider. You’re always free to shop around, find the best offer, and make a profitable decision.
CONNECT WITH THE RIGHT BUYER
Once the life settlement providing company checks if your policy is eligible for a life settlement, you get a price quoted from the company. And when you decide to take the offer, the company either buys your life insurance policy and pays you or finds a third party.
TAKE CARE OF THE DOCUMENTS
After you accept the life settlement offer, the provider initiates the closing process by the end of which the ownership of your policy is transferred to the buyer. You will be provided with certain documents that you have to sign. Once you sign the agreement, it’s sent to your insurance company through an escrow agent. The escrow agent takes care of all the documents for as long as it takes to transfer the ownership.
Once your insurance company reviews the closing documents, it transfers the ownership from your name to the buyer’s name. The time it takes to transfer ownership differs from company to company. After the transfer of ownership, the escrow agent releases the life settlement funds to you. And once you receive the cash, you no longer have to pay for the premiums.
NOTE- When selling a life insurance policy for a life settlement, you get a lump sum. This means the cash you get would be taxable. To know what the taxes you’d have to pay would be like, it is in your best interest to consult a legal professional or a financial expert.