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Life/ Viatical Settlements

The new "life insurance settlement" (AKA: Senior Settlement) options provide you with an alternative to simply lapsing a policy, allowing a term to expire, or accepting a "reduced paid up" because of a premium that you can no longer pay. The amount a company is willing to pay for your policy will depend on your age, your premium, and your health. It should not surprise you that if you are disabled or have a serious life threatening illness, a company is more likely to be willing to purchase your life insurance. That's because they don't expect you to live many more years, and when the death benefit is paid, they will be the ones benefiting from it.

Do you have a loved one who is terminally ill and for whom you are struggling financially to provide care? Relief may be closer than you think. When was the last time you reviewed the family life insurance policies? If a terminally ill individual has a large policyof nearly any typethat is still in force, you may be able to sell the policy for a large percentage of the face value. This is called a "viatical settlement."

In such a settlement, another company takes over payment of the premium. You receive a cash settlement which you can use as needed. When the insured dies, the company will receive the payout. You want to make sure that you use some of the money to pre-pay the insured's funeral expenses, however, as you will not be able to purchase additional life insurance.

Viatical settlements were once limited to the terminally ill. Government rules have changed, however, and you can now sell nearly any life insurance policy if you can find a company willing to buy it. When you sell a policy that does not involve a terminally ill insured, the transaction is simply called a "life insurance settlement." While such policies generally need to be quite large, the settlement can provide you with money for an emergency, a way of ending a high premium while starting some sort of annuity or IRA, or can even provide money to get your family through a difficult period of unemployment or tragedy. As with the viatical settlement, you want to make sure that you have plans for your final expense needs. If your health is good enough, you may simply be able to purchase a smaller life insurance policy and use the rest of the settlement for other needs.

While viatical or life insurance settlements are an option, you should always check out your other options before assigning your life insurance. Many policies now have "accelerated death benefit" riders. That means that, if you are terminally ill, you can receive up to half of the face value of your policy while you are still alive in order to help with expenses. Also, if you are disabled, check and see if your policy had a waiver of premium rider. Insurance agents often come across clients who have unnecessarily paid years on a policy only because they forgot that they had a disability waiver. If this happens to you, you will be able to get a refund of any premium you shouldn't have paid, so long as you can get a doctor's statement showing when you became disabled.

Finally, loans against insurance policies are also possible. As long as you pay the interest every year, you don't really have to pay back the loan. Your beneficiary will simply receive the face value minus any outstanding loans. These and other options should be examined with your family financial planner or a family agent who has handled your insurance needs for several years. Whether you seek a settlement or some other option, work with someone you have worked with in the past, not a new agent who will do little more than collect a commission and then never see you again.