Life Settlements: A Viable Option for Today’s Seniors
The past decade has seen dramatic changes in the life insurance realm. Aging people can no longer find adequate coverage on the open market, so many are turning to a new option called a “life settlement”. A life settlement is an opportunity for seniors to sell their existing policies back to insurance companies. This eliminates the need for seniors to have cash or liquid assets when buying an immediate annuity or long term care policy.
Let’s take a look at how life settlements work and whether they are right for you.
1. What Is a Life Settlement?
2. How Does It Work?
3. Are Life Settlements Right For You?
4. How Much Can You Get For Your Life Policy?
5. Are There Risks Involved?
6. What Else Should I Know?
7. Resources
8. References
The life settlement market is still in its infancy, but it is growing by leaps and bounds. Today’s seniors are turning to it as a viable option for financing long-term care or an immediate annuity without using their cash or liquid assets in order to qualify for either one. At the same time, it provides seniors with much needed cash which they can use to help them meet expenses and maintain a lifestyle they’ve become accustomed to over the years.
Life insurers have always been part of the world of investment. From the time we were born, we covered ourselves in life insurance policies. It was a natural and equitable way to plan for our future health care. This is true even today. But as life expectancy has lengthened and medical advancements have increased, it has become clear that there needs to be more flexibility than the traditional policy provides. Today’s seniors are turning to a new option called a “life settlement” in order to force insurance companies to provide them with better coverage than they can get on their own, since most of them do not have cash or liquid assets available in order to qualify for an immediate annuity or long-term care policy. This is especially true for those who are not yet eligible for Medicare.
Life insurance companies have traditionally been reluctant to tinker with their present policies in order to satisfy the demands of their customers. But it has become clear that the needs of this niche market can no longer be ignored. As a result, life insurers are beginning to offer options that accommodate the desires of this burgeoning segment of the market. The first steps have already been taken by some companies. They have begun offering premiums and benefits on an immediate annuity policy that meet or exceed those available on a traditional annuity or long-term care policy, but with more flexibility in the way they will cover you as you age.
There are a variety of factors that have contributed to the growth of life settlements. These include:
Many companies have begun to offer life policies without the need for cashing out. This usually requires you to keep making premiums and annual payments over a number of years. In this way, you’re still guaranteed coverage if your policy is ever cashed out, but you aren’t required to have a great deal of liquid assets available at the time that it must be sold.
But many companies don’t require cashing out at all. They offer life insurance policies that are immediately available to policyholders who are in good health and who don’t have any major health problems or chronic illnesses. If you’re in this sort of situation, you don’t actually need to have liquid assets or cash available, and you can sell your policy back to the company at any time.
Life settlements are also a good option for those who don’t qualify for Medicare, but want to take advantage of long-term care insurance coverage. This is because insurance companies are beginning to offer policies that fit very well with the needs of this segment of the market because they are built around immediate coverage and long-term care coverage that meets Medicare requirements.
The final advantage offered by life settlements is that they provide retirees with a great deal more flexibility than other forms of annuity or life insurance coverages do. In many cases, this flexibility is sorely lacking in the other forms of coverages available.
As a result, many retirees are using their current life insurance policies to pay for long-term care. This makes sense for several reasons:
Life Settlements can also be used to provide liquidity and cash reserves to those who need it (such as home buyers and others) if they don’t want to tap into their retirement funds. All in all, life settlements are a viable option for people at all stages of life.
One of the best things about life settlements is that they are simple for you to understand and use. Here’s an overview of the steps involved:
1. Know Your Policy
2. Find the Best Company
3. Get a Cash Amount
4. Receive Payment
5. What Happens if You Die?
Life Settlements can also be used to provide liquidity and cash reserves to those who need it (such as home buyers and others) if they don’t want to tap into their retirement funds, or are unable to because of ties with other insurance policies or annuities. This can be very useful depending on your situation.
One of the best things about life settlements is that they are simple for you to understand and use. Here’s an overview of the steps involved:
1. Know Your Policy
2. Find the Best Company
3. Get a Cash Amount
4. Receive Payment
5. What Happens if You Die?
As with any investment opportunity, there are risks involved in life settlements that you should keep in mind if you decide to pursue them as a viable option for funding long-term care or an immediate annuity when you retire (assuming you don’t want to cash out your policy). They are:
Liquidity: Life settlements force you to either keep your policy or sell it back to the company at a later date. If you do decide to cash out early, you will have lost your investment opportunity and your life insurance coverage. This can be problematic if you need the funds for other things. You may not have sufficient liquid assets available to support yourself in the future, and/or enough flexibility in your retirement plans to allow for a comfortable transition into another form of coverage like Medicare or Medicaid at a later date. This could prevent you from accessing certain benefits that Medicare, Medicaid, or an immediate annuity would provide later down the road, if at all.
Conclusion: Life settlements can be a good, healthy alternative to the standard life or long-term care policies that are available in most cases. They effectively provide you with additional coverages in the event you need them.
As with any investment opportunity, there are risks involved in life settlements that you should keep in mind if you decide to pursue them as a viable option for funding long-term care or an immediate annuity when you retire (assuming you don’t want to cash out your policy). They are:
Liquidity: Life settlements force you to either keep your policy or sell it back to the company at a later date.