Saturday, 26 July 2014

Negative life settlement stories focus on the rare greed of a few individuals or firms. They do not accurately reflect all of the good that comes when the elderly transfer life insurance ownership to brokers or investors. The facts below show that all parties benefit from a well-structured life insurance settlement.

Seniors Get Retirement Cash

A long-range estate-planning tool like life insurance can quickly become outdated. Financial needs change from year to year, especially when a spouse gets sick or children grow up to do well on their own. A policy that made sense 30 years ago may now just be sucking funds away from more important activities.

Life settlements give older adults the opportunity to dispose of insurance policies that they no longer need or can no longer afford to maintain. They can use the lump-sum settlement for any purpose, including long-term care costs, daily living expenses, travel and general spending. Instead of giving the policy back to the insurer for pennies on the dollar, seniors can get up to eight times more money through the settlement process. They also escape the hefty premiums, which can drain thousands out of a bank account each year.

Investors Get Stable Returns

Without the chance to make a profit, investors would never be willing to pay seniors more than the cash value of a policy. Investors find life insurance settlements so attractive because they supply exceptional returns for only a moderate amount of risk. With an outlay of as little as $20,000, qualified investors can double their money within a 10- to 15-year timespan. They can see estimated annual returns of eight to 10 percent or more after fees. Institutional and independent investors like the low-risk exposure. Life settlement proceeds do not rise and fall based on the whims of political powers, stock markets, interest rates or foreign unrest.

Brokers Get Intermediary Fees

Settlement brokers take commissions for connecting policy sellers with investment buyers. These brokers are not just middlemen, however. They invest in technologies that improve actuarial analysis and communication flows. Many also take over the paying of premiums until a policy has matured. Life settlement brokers gain long-term relationships with clients at the selling and buying ends of the spectrum.

Insurers Get Continuous Premiums

Under a life settlement, insurance companies continue to collect premiums until the insured passes away. This timeline provides up to 20 years of extra revenue that the insurer would not otherwise receive. If the owner had simply allowed the policy to lapse, the insurer would have been left with no incoming cash flow. At the same time, a surrender would actually have caused the insurer to owe money.

Even though each life settlement deal has different characteristics, the transaction always ends with four satisfied parties. So who benefits from a life insurance settlement? Everyone does.