Ever wonder why your life insurance company doesn’t advertise life or senior settlements? It is actually in their best interest not to say a word because they make less money as a result of people that decide to go with the senior settlement route. But, still, just what is a senior settlement and how can it possibly be of any benefit to you?
Also known as a life settlement, a senior settlement is what happens when you sell your life insurance policy to a third party, such as a bank or similar financial institution. Basically, these life settlements are little more than lump sum insurance settlements that someone pays you for the death benefits your beneficiaries would receive upon your death from the life insurance companyonly you get this money while you are still alive! Confused yet? Don’t worry, senior settlements are only mysterious until you see how simple they truly are.
Basically, a company or individual investor pays you a percentage of the death benefits that your beneficiaries would receive when you die. They clearly cannot pay you what your heirs would receive in a normal life insurance settlement because they would not make any money doing so. Plus, these companies and businesses continue to pay the premiums on your life insurance policy until, well, the time of your death. They are taking a gamble on how long you might live so the younger you are when you enter into a senior settlement, the smaller the percentage is that they are willing to pay upon the total of your death benefits. So, what is in it for you and why even consider getting less money for your death benefits after paying those life insurance premiums for all those years?
The truth is that many of us buy life insurance when we are younger and less prepared for things like retirement. But as we age, we honestly tend to need life insurance less and less because we are generally better able to tend to our financial affairs than when we are younger. Upon our death, our loved ones have less to worry about at this time and therefore you may consider “cashing in” your life insurance policy. But, a senior settlement will generally payout much more than the life insurance company will give you in the surrender value. This is because, unlike senior or life settlements, the insurance company will surrender the money you paid in on premiums but will most likely not give you any of the money that they have made in interest off of your premiums over the years. A senior settlement, however, does give you some of that money and it will almost always exceed the surrender value paid by a life insurance company.
Senior settlements are not for everyone. But if you no longer need a life insurance policy that may have become obsolete and if you are looking to boost your nest egg or just have some more cash to invest for your retirement, you should consider a senior settlement. Senior, or life settlements, are not as mysterious as you may think and you will make out better than if you simply cashed in your life insurance policy. Just find out what your life insurance surrender value is and then shop around for some senior settlements and you will could be very surprised at how much more profitable they are in comparison. And just like any of your other investments make sure you know the real value of your life insurance before you sell.
Jim Prescott, CPA business consultant for over 30 years specializing in small and medium size businesses that range from closely held to publicly traded companies. Jim is a Partner in CPA firm Prescott Chatellier Fontaine & Wilkinson, LLP that offers audit, accounting, investment advice, tax planning services, estate plans, pension plans consulting and insurance advice. In addition to the CPA firm’s web site Prescott Chatellier Fontaine & Wilkinson, LLP you can find more information and Articles on Life Settlements at http://www.yourlifesettlements.com.
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