A life settlement can provide additional funds to use in retirement.
If you are in retirement, you are living on a fixed income.
What you saved in your nest egg needs to last for the rest of your life and the life of your spouse.
Although Social Security can also provide a monthly stipend, it is typically not sufficient to maintain a comfortable standard of living for aging individuals.
According to a recent The Street article titled “Is Your Life Insurance Policy Worth More Than Its Cash Surrender Value?,” a life settlement may be a good option for you if you have a life insurance policy you do not intend to keep.
This can maximize the money you get from the termination of your policy.
If you simply let your policy lapse, you will receive nothing.
Surrendering the policy to the insurance company for cash value will give you a little in return.
You may get more for your policy from a life settlement.
Many people do not choose this option, if they know it exists at all.
Life insurance industry data from 2019 estimates more than 90 percent of life insurance policies terminated in 2018 were surrendered or lapsed.
In about 80 precinct of these cases, the owner of the policy received nothing.
In fact, more than $2 trillion in life insurance policy death benefits are estimated to be lapsed or surrendered in the next decade.
How do you qualify for a life settlement?
You must be at least 70 years old.
You must also own a universal life insurance policy, a whole life insurance policy, or a convertible term life insurance policy with a death benefit of at least $100,000.
The development of a significant health impairment used to be a qualification, but now healthy individuals may qualify under certain conditions.
Before making an offer, the life settlement companies may take several months to review full medical records and independent underwriting.
If you are considering getting a life settlement, discuss the option with your financial advisor and experienced estate planning attorney to ensure it aligns with you retirement and estate planning goals.
Reference: The Street (Dec. 22, 2020) “Is Your Life Insurance Policy Worth More Than Its Cash Surrender Value?”