Three in Four middle income households in the US have life insurance policies. But did you know that almost all those life insurance policies lapse? In fact, it’s estimated that 99 percent of term life insurance policies lapse, all without paying out a single penny in death benefits. To add insult to the injury, the policy amounts annually allowed to lapse hovers around $100 billion. It seems like the only real benefit to life insurance policies is for the insurer, and hardly for the insured. But it doesn’t need to be that way.
The life settlement market really began to grow during the 1980s. It burgeoned from the proliferation of lapsed insurance policies. Understanding that there was a massive opportunity here, life settlement brokers took to helping those with old policies. When a person can no longer pay for the insurance policy, the insurance agency offers two different options: a full surrender of the policy, or a cash-surrender. If a person engages in a cash-surrender, they often receive fractions of the full policy amount, and the provider keeps the money they’ve been pocketing for years. Life settlements offer an alternative to that. Working with a broker, one can often get paid out far more than the cash-surrender value. But how do you go about engaging in a life settlement? Is it a complicated and time consuming process?
The answer to the second question is a resounding no! The life settlement process is actually quite simple and pain free. It does not require much effort on the part of the insured. Here are the steps:
- Submit an Application form – To start, one fills out an application form that a life settlement broker can provide you. The forms are simple to fill out and include a medical history and information about the life insurance policy. The life settlement broker will be the one dealing with possible buyers for your policy.
- Evaluate Viability of a Life Settlement – Once they have received the proper documentation, the broker submits the forms for evaluation, helping to determine the life expectancy of the policy holder. The purpose is to determine if there is arbitrage in the market. The greater the arbitrage the more conducive it is for a life settlement and the greater the payout will be.
- Get Offers from Potential Buyers – Following this, the broker has a better idea for how to market the policy and begins to look for buyers. An experienced and competent broker will leverage the various funds and providers against each other to get the best offer possible.
- Bring Offers to the insured – The broker will choose the best options and present them to the policy holder. The amounts will often be quite large, often running into the hundreds of thousands of dollars depending on the life expectancy estimate and the size of the life insurance policy.
- Accept an Offer – Once you accept an offer, the broker finalizes the deal and the buyer and you sign the contract. And that’s it.
- Closing – The closing process is very similar to a real estate closing. Forms are signed and funds are deposited in a third party escrow account and once the forms have been processed the funds are transferred to the insured.
Life settlements are quite a simple affair. You get paid, stop dealing with policy payments, and can sleep easy. No longer should you have to give up a life insurance policy for mere fractions of its worth. With life settlements it is simple to make the most of a difficult situation. Make sure that you speak with a licensed life settlement broker to get the best deal for your policy. It can be an effortless process if the right people handle it.