Life Insurance Settlement Procedures
Tax Liability, Fees and More
An existing life insurance policy that is bought by a third party in exchange for cash is termed life insurance settlement. Any senior citizen, above the age of sixty-five whom are met with critical health problems, financial crisis, terminally ill or other reasons which require immediate cash, can choose to opt for a life insurance settlement to relieve any of their financial obligations. Life insurance settlement companies/brokers generally purchase life insurance policies from these people. A fixed percentage of the policy amount will be paid by these companies/brokers. The amount paid would be much more than the value of the policy when surrendered. But the amount would certainly be lesser than the death benefit given by the insurance company.
The fixed percentage of the money paid by the life insurance settlement company would depend on a few factors; age, life expectancy of insurance policy owner, policy size, market rating of insurance provider company, etc. When one requests for a life insurance settlement, the company will then prepare all required documents and submit them to the respective insurance company to request for a change in ownership of the policy. Once everything is confirmed by the insurance provider company, the life insurance settlement company will then start collecting benefits and paying premiums for the insurance policy.
Policy owners must be very careful when making decisions on settling for a life insurance settlement. Here are some tips and advices for you before you make a life insurance settlement deal.
Tax Liability
Insurance policyholder must take note that tax is imposed by the life insurance settlement company for the premium amount which they pay; policyholders who pay the premiums are not charged for tax at all. It is wise for policyholder to seek their tax adviser for advice before paying any tax.
Quotations and Fees
Searching for several life insurance settlement companies would be a smart move for policyholders. This is because you can choose the best out of all the companies which you have scouted for. Also, get each of them to give you a quote and ask them about the fees which they charge (if they do charge fees).
Licensed Broker
Make sure the company/broker which you want to make a deal with is licensed (recognized/licensed by the government or similar institutes). Ask to see their insurance license and current business license before signing anything.
Settlement Process
Policy owners need to thoroughly understand the process of selling his/her life insurance policy. He/she must decide for themselves whether to sell this insurance back to the insurance provider company or through a life insurance settlement company/broker. This is the most crucial decision which might have an effect on the policyholder.
Last but not least, policyholders must ensure that the application is filled truthfully (failure to do so might force the law to come against you). Policyholders must have full knowledge on the laws which are applicable to the contract (if there are any). If you are unsure about the contract details – ask questions until you are satisfied. Don’t ever allow yourself to be forced into signing anything.
Therefore, insurance policy owners must be very careful when seeking a life insurance settlement program. If you are unsure or confused about any part of this program, consult your financial adviser or family members about this issue.
Tags: broker · insurance company · Life Insurance · policy owner · policyholder · settlement · tax
