Consumers tap into Life Settlements
For growing numbers of consumers, a life insurance policy has more value than they may realize.
According to a recent Wall Street Journal article, the sale of life insurance policies has become a new investment phenomenon. It is attracting the attention of people over 65 who own high-value insurance policies with escalating premiums.
The Sept. 21 article, titled �Selling Your Life Insurance to a Stranger,� describes how many life insurance policyholders feel the value of the policy does not justify what can be a formidable cost to maintain them. Yet these policyholders don�t want to let their policies lapse and receive nothing after investing thousands of dollars in them
The life settlement process allows policy sellers to transfer their policies to a buyer who is then named as the beneficiary. The buyer pays the seller a percentage of the policy�s face value and continues to pay the premiums until the seller dies, at which point the buyer collects on the policy. The amount paid by the buyer is based on the age and medical condition of the seller and the face value of the policy.
Life settlements are a new version of a well-established practice in the insurance industry known as �viatical settlements.� Terminally ill policyholders of any age who may want to cash out their policies to provide a source of funds to deal with medical expenses also can sell their insurance policies. Cash flow consultants are equally qualified to connect such sellers with qualified buyers. These settlements may be strictly governed by state and federal laws. One caveat to remember: There may be income tax liability imposed on policyholders entering into life or viatical settlements . Anyone thinking of doing so should check with their tax professional first.
