Senior Settlements
Why would one opt to sell a life
insurance policy?
You might be tired of paying for a policy you no
longer need. Policies are sold for many reasons. Often, the original
purpose or need for the policy has changed or has diminished
entirely.
What is the literal meaning of the sale
of my Policy?
A life insurance policy is considered a personal
property, like house, car or stocks & bonds. Like these assets,
this can also be bought and sold. In this sale, you transfer all
rights and obligations of your life insurance policy to a third
party for a percentage of the face value of that policy. The full
value of the policy will eventually be paid to the third party.
What conditions lead to this decision
for any individual?
Primarily, people take this decision due to the
changing circumstances, like:
- Retirement
- Affordability of Premiums
- Change in Estate Size
- Death of the Beneficiary
- Sale of a business or Financial Planning Changes
There might be other issues involved like:
- Insured wishes to distribute funds while living
- Desire to invest funds
- Policy has not met original illustrated values
- Charitable Foundation holdings policies
- Poor performance of the defined benefit plan
Changes In Estate And Business Planning
Needs
Estate Planning
To avoid the 1035 Exchange Rule, Survivorship
Policy is preferred over an individual's insurance policy.
There is a reduction in estate size due to loss of
net worth or completion of estate planning techniques and less
insurance is required to fund projected estate tax liability. A
policy needs to be removed from an estate. The three-year-rule can
be avoided by using the proceeds to repurchase a new policy outside
the estate.
Business Changes
- Key person policy is no longer needed due to retirement or
change in business structure.
- Buy/Sell funding is no longer required.
- Policy is entangled in litigation.
- Business owns poorly performing policies.
- Bankruptcy causes liquidation of assets.
- Deferred compensation programs have changed.
Personal Planning
- Policy does not meet the original illustrated values.
- Premiums have to be increased or policy will lapse.
- For current distribution of funds, the sale of a policy really
helps.
- Divorce changes desired need for life insurance.
- Individual's financial situation makes premium payments
unaffordable.
- Funds can be used to clear the loans and outstanding debt.
Charitable Organization
- Charity is paying premiums on gifted policies.
- Before a policy is gifted to a charity for its value, it can
be sold for a possible higher donation and can be written-off for
the donor.
Policies Considered
For minimum face amount of
$100,000, the policies to choose from are :
- Term Life
- Variable Life
- Whole Life
- Survivorship Life
- Universal Life
- Adjustable Life
- Group
- Joint First to Die
With a whole lot of segregated and specialized
choices available, one does not need to be locked into an insurance
program that does not meet their lifestyle or present needs.
