Life Settlements Are a Unique Source of Cash
Elderly individuals who have maintained a life insurance policy may no longer have beneficiaries who will benefit from the death benefit. This means a policy can be sold or a life settlement can be used for a source of cash.
Description
Certain types of life insurance policies have a cash surrender value, but this is typically a few thousand dollars. A life settlement can net an individual a certain percentage of the death benefit. The process of a life settlement involves the sale of the policy through a life settlement broker. Money is received in a lump sum.
Uses for Money
A life settlement can be used for any purpose. The main benefit for an elderly individual is to receive a lump sum of cash that can help with medical bills. Money received from a life settlement will help pay for in-home care, adult day care, senior living facilities, nursing home care, and long term care. A lump sum of money can also be used to renovate a home.
Health Care Payments
The creation of health insurance exchanges required by the Health Care for America Plan may offer the elderly or recently retired individuals a way to help lower health care costs. This means money that can be obtained from a life settlement can be used to help pay for needed coverage.
Time to Receive Payment
Money from a life insurance settlement is typically received within six to twelve weeks. The wait often varies based on the time the sale process for a life insurance policy begins. One of the biggest delays of a sale is medical information that is needed to establish the payout amount.
Payout Amount
Payouts for a life insurance policy are based on the face value or death benefit of the policy. There may also be other factors that are considered, such as age, life expectancy, and cash surrender value. Money from the sale of a life insurance policy is typically up to three times the cash surrender value.
No Restrictions
Money that is received from a life insurance settlement has virtually no restrictions. One thing that will need to be considered is that the cash received may be taxable. This is because the money received is a source of income or a capital gain in the eyes of the IRS. One aspect of a life settlement payout may be a tax deduction if the proceeds are used to pay the cost of long-term care.
Eligible Policies
The types of life insurance policies that can be sold for a cash payout will include whole life, universal life, term life, variable universal life, second-to-die, and convertible term.
Category: Insurance, Uncategorized
