CHAPTER 6. ALTERNATIVES TO LIFE SETTLEMENTS
Despite the many occasions when life settlements have provided seniors with lucrative payments above and beyond what they would receive by surrendering their policy to their insurance company for a cash payout, life settlements are not always the right financial choice. Here are some alternatives to life settlements that can help you manage your life insurance policy or receive money for it.
- Renegotiating Premiums
If the life insurance policy is or will become unaffordable to you, it may be possible to change the amount you have to pay in premiums by negotiating with your life insurance company. This may result in a lower death benefit, but allow you to make premium payments more comfortably.
- Withdrawing Cash Value
If you need liquidity, you may be able to withdraw part of the cash value of your policy. This, too, would result in a lower death benefit, but provide you with an instant cash injection.
- Pay Premiums With Cash Value
A combination of the above two actions, you can use the built-up cash value in your policy to pay premiums. This is an option only if your life insurance policy has some cash value, and you should be careful if you choose to go this route, as running out of cash value can cause your policy to lapse.
- Take Out a Policy Loan
You can take a loan from the insurance company using your built-up cash value as collateral. If handled properly, you won’t even have to pay it back – the loan amount will be deducted from the death benefit of the policy. The interest rate is often around 9% for such loans. While these kinds of loans can provide a quick injection of a large amount of cash, if not structured properly, you might well end up owing and paying more in interest and premiums than you can handle. Be sure to comprehensively go over such an option with a competent financial advisor and your insurance agent if you’re considering taking out such a loan so that you understand how it can be structured and the risks that come with it.
- Surrender Your Policy
The process through which you withdraw the full cash value of the life insurance policy and cancel it is called “surrendering” your policy. You should know that most insurance companies will charge a fee when you do this, and the proceeds from surrendering a policy are taxable – talk with a financial advisor or tax specialist to see what that means for you. In some cases, the cash surrender value of your policy might be more than you can get in a life settlement.
INTRODUCTION TO LIFE SETTLEMENTSCHAPTER 2.
LIFE SETTLEMENT COMPANIES – BROKERS AND PROVIDERSCHAPTER 3.
СOMMON CONCERNSCHAPTER 4.
WHO QUALIFIES FOR A LIFE SETTLEMENT?CHAPTER 5.
HOW MUCH IS MY LIFE INSURANCE POLICY WORTH?CHAPTER 6.
ALTERNATIVES TO LIFE SETTLEMENTSCHAPTER 7.
THE LIFE SETTLEMENT PROCESS