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The Simple Truth About Life Settlements

The Simple Truth About Life Settlements

If you have been thinking about a life settlement on your life insurance policy to diversify your portfolio or to try and save money, it’s important that you know what to expect during the process. Here’s a quick look at the simple truth about these settlements.

What is a life settlement, anyway?

In short, a life settlement is where you sell your life insurance for a cash amount. Some people do this when they believe that are over insured, or if their costs to keep the policy have outweighed what the actual benefit is going to be. By getting cash for your life insurance, you can use that money for other things, or to diversify your portfolio.

What are the positives of getting a life settlement?

There are quite a few things that you will get out of getting a life settlement. Here are just a few of them.

  • You get money that can be used right away, or as soon as you get it into your account. You don’t have to wait until the policy holder passes away to use it.
  • You can roll the money over into other investments as soon as the money has been released for your use. If you decide to do so, you can get it rolled over into an investment account and you’ll be ready for the future.
  • You can end up saving a lot of money. Sometimes, life insurance policies aren’t worth paying for anymore, because the premium is just too pricey or you have other money set aside. In those cases, you get your cash back and can use it for other things.

Are there any risks related to getting a life settlement?

Obviously, as with any financial thing, there are also risks that you have to think about when it comes to a life settlement. Here are a few.

  • In many cases, you only get up to 70% of the value of the policy, depending on the case. So, look into what you’d be getting out of it first.
  • How much tax will you have to pay when you sell your policy? Your broker and/or the IRS can give you a better idea as to how much it may cost you when tax time comes around.
  • There are some cases in this industry where there is fraud, but you can avoid this as long as you look for a company that has a solid reputation and that you know is going to do the work for you and not for them. Laws are still being developed in this area, so you want to make sure that you do the background research first, because there currently isn’t a lot that is protecting you.

So, now that you understand them a little better, you will be in a better spot to make a decision about the future of your current life insurance policy. Have questions or want to get started? Get in touch with us today and we will help you out.

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Stephen E. Terrell

Stephen E. Terrell is president of Life Guide Partners. He may be contacted at stephen@lifeguidepartners.com.