Circumstances change as one moves through life and it may become expedient to arrange a life settlement rather than continue to carry a life insurance policy you no longer need. In this case you might sell your life insurance policy to a third party in exchange for a single cash payment. The party which has purchased your policy then becomes the official beneficiary, and is responsible for covering the cost of premiums.
Not everyone can sell their life insurance policy though. The individual in question can’t have a life threatening illness, for example. Companies often sell such policies which were once held upon important members of their staff but who have since moved on. This allows them to gain some liquid assets in exchange for an asset that had no liquidity at all. A factor in the decision to sell the policy may be the fact that the life settlement offers a possibility of gaining more than the surrender value of the policy.
An individual may opt to sell a policy if they feel it is under-performing or if they feel the policy is worth more than its surrender value. There are a number of ways to sell one’s policy, for example, through a broker or directly to an investor. To those who purchase life settlements, the move is identical to any other investment strategy they employ.
There are very specific rules regarding such sales, so check with state regulations before you enter such an agreement.
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