The Ten Top Things to Consider Before Selling Your Life Insurance
In Viatical settlement or life settlement, the life settlement company will buy the policy from the owner of the policy.
These arrangements were now widely being used when the life insurance policy is no longer needed, the premium payment has become unaffordable, the policy is about to lapse, the policy owner needs funds something urgent such as health care, debts, or mortgage.
Below are some of the key tips to consider before selling off your life insurance policy: 1.
Check for alternatives.
-Check with your current insurance company and see if they offer an accelerated death benefit or policy loan.
You should always discuss all the options with a financial advisor to analyze what is the best for you before selling off your policy.
2.
Do you need the life insurance protection.
-Despite your main intention for immediate cash, ask yourself how important is this life insurance coverage for you - And recall back the main reason for you to purchase this life insurance policy in the first place 3.
Think it over and also talk with your beneficiaries.
- If they are depending on your death benefits to pay for the cost of your outstanding medical treatment or funeral fees or any other outstanding debts of yours, they will need to know about your decision to sell off your life insurance policy.
4.
Your lost eligibility for Medicaid.
- Check it out if you will lose benefits from Medicaid or other public assistance programs if you receive a cash settlement for this.
5.
Tax aspect of selling off your insurance policy.
- Check out if the proceeds are of tax-free or otherwise.
- According to the Health Insurance Portability and Accountability Act, if the insured is terminally ill the settlement is not subject to federal income taxes; but if the insured is mildly ill or healthy, the settlement will be taxed as a capital gain.
6.
Shop around for viatical companies.
- Companies differ on the amount of payout and compensation they offer for viatical life settlements, so make sure you shop around and compare before selling it off.
7.
Are there any transactional costs? - Yes, ask the brokers to disclose all the offers, acceptances and rejections relating to the sale of your policy within 3 days of their receipts by the broker.
The broker is responsible to disclose the compensation amount, the broker commissions before the contract is signed.
In many cases, the transactions costs can be as high as 30%.
8.
Will you be able to get a new life insurance policy later? - Even if you are liable to get a new insurance policy, make sure you can get the right coverage and at what cost - Often the premium will be much higher for the new policy as you are older or changes in your health status now 9.
What is the amount of the settlement? - The amount will depend on your age, health condition, the type of life insurance policy, the death benefit amount, the premium of the policy and the compensation amount the life settlement can be sold at.
- If you have any insurance with cash value, the amount you get should be greater than the cash surrender value of your policy.
10.
The legitimacy of the viatical company - Check with the state insurance department on the viatical licensing and requirements from the law perspective and ensure that the company you are selling this life settlement to, is legitimately licensed.
These arrangements were now widely being used when the life insurance policy is no longer needed, the premium payment has become unaffordable, the policy is about to lapse, the policy owner needs funds something urgent such as health care, debts, or mortgage.
Below are some of the key tips to consider before selling off your life insurance policy: 1.
Check for alternatives.
-Check with your current insurance company and see if they offer an accelerated death benefit or policy loan.
You should always discuss all the options with a financial advisor to analyze what is the best for you before selling off your policy.
2.
Do you need the life insurance protection.
-Despite your main intention for immediate cash, ask yourself how important is this life insurance coverage for you - And recall back the main reason for you to purchase this life insurance policy in the first place 3.
Think it over and also talk with your beneficiaries.
- If they are depending on your death benefits to pay for the cost of your outstanding medical treatment or funeral fees or any other outstanding debts of yours, they will need to know about your decision to sell off your life insurance policy.
4.
Your lost eligibility for Medicaid.
- Check it out if you will lose benefits from Medicaid or other public assistance programs if you receive a cash settlement for this.
5.
Tax aspect of selling off your insurance policy.
- Check out if the proceeds are of tax-free or otherwise.
- According to the Health Insurance Portability and Accountability Act, if the insured is terminally ill the settlement is not subject to federal income taxes; but if the insured is mildly ill or healthy, the settlement will be taxed as a capital gain.
6.
Shop around for viatical companies.
- Companies differ on the amount of payout and compensation they offer for viatical life settlements, so make sure you shop around and compare before selling it off.
7.
Are there any transactional costs? - Yes, ask the brokers to disclose all the offers, acceptances and rejections relating to the sale of your policy within 3 days of their receipts by the broker.
The broker is responsible to disclose the compensation amount, the broker commissions before the contract is signed.
In many cases, the transactions costs can be as high as 30%.
8.
Will you be able to get a new life insurance policy later? - Even if you are liable to get a new insurance policy, make sure you can get the right coverage and at what cost - Often the premium will be much higher for the new policy as you are older or changes in your health status now 9.
What is the amount of the settlement? - The amount will depend on your age, health condition, the type of life insurance policy, the death benefit amount, the premium of the policy and the compensation amount the life settlement can be sold at.
- If you have any insurance with cash value, the amount you get should be greater than the cash surrender value of your policy.
10.
The legitimacy of the viatical company - Check with the state insurance department on the viatical licensing and requirements from the law perspective and ensure that the company you are selling this life settlement to, is legitimately licensed.
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