Posted by Chris O'Sullivan
In these harsh financial times, people are looking for cash in unusual places. Some people are even looking to sell their life insurance policies in transactions known as life settlements. Firms such as Life Partners Holdings, Inc. are willing to liquidate your life insurance policy in exchange for the value of the policy upon your death. In essence, you are selling a future payout for a one time, immediate payment.
Firms will buy your policy on behalf of its investors. The firm then acts on behalf of the investors, who have now become the owners of the policy and will pay the premiums until the day you die. Firms collect the benefits upon death and pay a 9-12% return to its investors. Some firms may even buy and repackage the policies for sale to a third party.
A major downside to selling your policy is the high transactions costs. A recent study showed that seniors over the age of 65 who sold their policy received only 20% of the face value. Those looking to sell should be certain that they will not need another policy in the future. These transactions are also taxable, whereas the payouts to your beneficiaries would have been tax free. In conclusion, it is important to shop around just as you would have done when buying the policy in the first place.
Source 1
Source 2
Source 3
No comments:
Post a Comment