Life Insurance: Basics of Senior Settlements

Senior settlements is one way for those over 65 years of age to obtain cash flow in an equitable manner. Buyers (financial institutions) have shown an increased interest in life settlements in recent years. The owner accepts a cash settlement for a percentage of the policy's face value. Investors

First, there are certain qualifications a policy holder must meet before considering a senior settlement:
-the policy's face value must be at least $1000,000 (less if the insured's life expectancy is shortened),
-the policy must be beyond the two-year contestable period with no liens,
-annual premiums are generally less than 5% of the policy's face value,
-and the insured must be in a health situation that will continue for at least twenty-four months, but generally expected to live less than twelve years.

Why would you consider a Senior Settlement?

Several options are available if the criteria is met. Many policy holders use the payoff to settle debts and for further investing. They may also use it for retirement income and to reduce medical bills. If you are revising an estate plan, a life settlement often factors into the tax advantages. Always seek the assistance of a qualified adviser for the latest rulings on taxes and life settlements.

There are other viable reasons. You may be considering the purchase of another type of policy, the existing policy is about to lapse, or the premiums have risen or have become too costly. In the past, the only option was to turn the policy back to the institution at a much-reduced rate of payoff. Today, it is a seller's market. Some brokers will shop the policy to qualified institutions for the best payout.

How do you qualify for a Senior Settlement?

In most cases, you'll be required to sign medical release forms so the institution can access information from the insurance company and your medical team. This is conducted in complete confidentiality.

Several other factors will weigh into the final offer on your policy. These will include the rating of your life insurance company, your predicted life expectancy, the amount of your current premiums, and any provisions of the policy itself.

You can change your mind, even after accepting the money - usually within 15 or 30 days of receiving the check. If you should die within 15 or 30 days (depending on the state in which you reside), the settlement will be revoked and the original policy payment will be made minus the Senior Settlement payout.

Once you sign the agreement, a representative will be calling regularly to check on health status. You can accept the inquiries directly or appoint someone to report for you.