What is life settlement?
Life insurance policies are purchased by the insurers in the hope that they will help them weather the storms during all the tough phases of life. With changes like increase in average life expectancy and drastic decrease in the morbidity rate, there has been exploitation of seniors by the insurance firms. Life settlement policies involve selling of the life insurance policy by the aging insurer to a third party who tends to get all the benefits of the policy after the demise of the policyholder. Once the policy has been purchased, premium payments have to be done by the buyer that in turns becomes the beneficiary of the policy.
Life settlement policy is similar to viatical settlement policy that was launched for the terminally ill AIDS patients in early 90’s. The difference between the two is that the life settlement policy holder should not be ill or suffer from any terminal disease. Viatical settlement policy works in scenarios where the life expectancy of the insured is less then two years.
The process of the life settlement involves the sale of an insurance policy by an aged person having a limited life expectancy. The insurance policy is purchased by the third party or any other investor. The investor pay a lump sum amount to the policy holder as a result becomes responsible for the premiums and liabilities of the purchased insurance policy. Life settlements are being used as professional financial tools by both the investors and the policy holders as they tend to pay a lump sum amount to the insured person as a result of selling an asset that was otherwise ignored or discarded.
Most of the senior citizens having an insurance policy are unaware of the fact that their insurance policy can be liquidated for 20-60 percent of the current coverage amount. A wisely done life settlement deals helps those senior to easily spend the retirement years.