Reverse life insurance (also known as life settlements) have become a boom industry during the past few years. Life settlements refer to the sale of one's life insurance policy to a third party for an immediate, set sum of money. The growing popularity of reverse life insurance could be due to the tough economic times, but a plethora of other factors are probably involved. A life insurance policy could be underperforming. Some policy owners feel their premium payments are overly burdensome. Divorce, unexpected medical bills and other life events make the proposition of cash-on-hand extremely attractive. When one's children become adults, the initial reason for insurance coverage may no longer exist, making the life insurance policy superfluous. Along the same lines, when presented with a business opportunity, some policy owners look to their insurance policy as a source of capital infusion. Other factors make the reverse life insurance option enticing: tax laws, discovering that one is over-insured, setting one's sights on a new charitable goal, etc. The list goes on. Below, we'll review the most popular benefits that lead people to seek life settlements.
The Main Benefit
The benefits of a reverse life insurance contract are as diverse as the reasons people have for entering into them. Chief among all these benefits, however, is the fact that a policyholder can personally net cash by selling their life insurance policy. This is a special benefit for those whose family is already well provided for--perhaps by a family business, or a trust, or by selling other assets, or by accessing money in a savings account, or by a valuable investment portfolio. With their loved ones properly cared for, the policyholder can convert their life insurance policy into an asset that is available for other worthy purposes.
A business investment is one good use for new capital. This business investment, in and of itself, could provide stability to your family after your passing. An alternative to starting--or investing in--a new business is to invest in a better life insurance policy or some other appropriate investment.
When an unforeseen medical expense shows up for you or for a family member, the best option for getting funds to pay the bills may be a life settlement. Get the medical care you need, live longer, and you may be able to earn more from your livelihood than your family would receive from the death benefit of your life insurance policy.
No Longer Worth It
Often when people think of life insurance, they imagine their family receiving a fixed amount of money after their death. Often, however, that isn't how life insurance works. Those who find their life insurance policy underperforming may elect an immediate payout and transfer those funds to another investment opportunity. Others may simply see the needed insurance premium payments as no longer affordable. By selling the policy, it is possible to erase debts from your budget and, in the process, to enjoy an immediate infusion of cash.
No Longer Necessary
Lastly, after you learn how life insurance works, you may find that life insurance is simply no longer necessary. When your spouse passes on (or simply has funding from elsewhere), or when your children are taken care of, it might not seem necessary--or desirable--to keep on paying the monthly life insurance bill to keep your policy active. Couple this with the good that could be done with the money gained by selling the un-necessary insurance policy and a life settlement makes a lot of sense. If that seems to be the case for you, sit down with a financial planner and ask them to go over your options for enjoying your money today.