Seniors and retirees should be aware of their options when it comes to financial investments. Most financial investments can be bought, sold, and lent against including life insurance policies and homes. While you can sell a term, whole or universal life insurance policy to a third party for cash, you may wish to consider borrowing a portion of the cash value in your policy through a policy loan. In the case of your home, you can borrow money against the equity in your home through a traditional home equity loan or line of credit, or in the case of seniors, borrow the equity on a monthly basis spread over their expected lifetime through a reverse mortgage.
Both term life insurance and permanent life insurance can be sold through a life settlement. This usually occurs when the insured decides that they no longer need life insurance and the “now” outweighs the “later.” In the case of permanent policies, the cash payment is more than the cash surrender value but less than the death benefit. The value of a life settlement is determined by the age, health and type of life policy of the insured and is sold to a licensed buyer known as a life settlement provider who continues paying the premiums until death.
For those that are terminally ill, a viatical settlement (a life settlement of a terminally or chronically ill individual) generally has a higher payout than a traditional life settlement because the insured’s life expectancy is shorter. Martha White of Money.com explains, “a viatical settlement can yield a higher price. Since the buyer theoretically will be paying premiums for no more than two years before they collect the death benefit, the cash offer is higher than the policyholder that is expected to live longer . . .In addition, the proceeds from a viatical settlement can receive more favorable tax treatment. While proceeds from a life settlement could be taxed as income based on the state you live in, those receiving a viatical settlement may not be. If the money is used to pay for qualifying healthcare expenses, for example, you might be eligible for favorable tax treatment, according to I.R.S. regulations” (money.com). Understand that in such settlements you are deciding to take lump sum now and surrender any future benefits to beneficiaries.
An alternative to selling a policy, especially if you intend to provide something for dependents or heirs, is to borrow against the cash value of a permanent life policy and pay it back from the death benefit. White explains, “if you have permanent life insurance, it’s possible you’ll be able to borrow against the cash value that’s built up in the policy. Such loans do have disadvantages, but they do give you access to cash without having to sell the policy. And while the loan would be deducted from the death benefit upon your death, and is subject to interest, it would allow you to leave the remainder of the policy’s proceeds to your heirs, free from possible seizure by your creditors” (money.com). As with all financial investments, consult a financial advisor, attorney, and tax professional for guidance and transparency. Life settlements are regulated by individual states so you need to comparison shop among brokers and providers as quotes and services can differ from broker to provider.
For those seniors and retirees who may not have a determined life expectancy or are not terminally ill, but are interested or in need of accessing some cash, may want to consider a reverse mortgage, but this option is not for everyone. A reverse mortgage is a loan to a homeowner which is based on the equity in the home and instead of making monthly mortgage payments to a lender, the lender makes payments to the homeowner (borrower). The borrower is not required to pay back the loan until the home is sold, vacated or upon the death of the homeowner. The value of the loan is determined by the appraisal of the home. Reverse mortgages are regulated by the Federal Housing Administration. Reverse mortgages can be beneficial for senior homeowners who need extra cash for immediate purposes and who would not qualify for normal home equity loans due to limited income.
MRE Finance specializes in helping seniors sell their life insurance policies for a one-time cash payout known as a life settlement. Whether paying for medical bills, paying other debt or whatever you choose, MRE Finance will find a buyer, answer questions and guide you through the process with ease. This option may be the option that many are more comfortable with to sustain financial security.
Our free online life settlement calculator can provide you with an estimate of your life insurance policy’s value within minutes. If you prefer to speak with someone, call the experts at MRE Finance today at 1-800-521-0770.
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