Selling Your Life Insurance Viaticals and Life Settlements
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Selling Your Life Insurance: Viaticals and Life Settlements
If you're facing a difficult financial situation with no foreseeable end, selling your life insurance could be a viable option. This article provides essential information to help you navigate the process.
Understanding the Terms
When researching the sale of life insurance, you'll encounter two main terms: viaticals and life settlements.
- Viaticals: Typically refer to selling a policy when the insured is chronically or terminally ill.
- Life Settlements: Involves selling a policy for those generally over 65, who are not terminally ill.
State regulations may vary, so terms might be used interchangeably. Always verify how your state categorizes these transactions.
How It Works
When you sell your life insurance policy:
- You receive a lump sum in exchange for the policy.
- A third party becomes the new owner, pays future premiums, and collects the death benefit upon your death.
You can sell directly to a viatical company or life settlement firm, or work through a broker who will find the best offer by presenting your policy to multiple buyers.
This process is confidential, but ensure you work with a respectful, experienced organization to avoid privacy intrusions.
Who Should Consider Selling?
Individuals with severe illnesses often sell their policies to cover expenses like medical bills. Seniors may also sell if:
- The beneficiary has passed away.
- They can no longer afford premiums.
- They wish to use a lump sum for personal expenses.
Different companies have varying eligibility criteria, so explore your options.
Advantages of Selling Your Life Insurance
- Immediate Cash: Receive a lump sum instantly, which is particularly beneficial for those facing high medical costs.
- Higher Returns: Selling often provides more than surrendering the policy to the insurance company.
- No More Premiums: Eliminate the financial burden of ongoing payments.
- No Repayment: Unlike borrowing against your policy, you don't have to repay the received money.
- Flexible Use: Spend the proceeds as you wish; in some cases, the money is tax-free.
- Preserving Legacy: Use the remaining funds to leave behind a financial gift to loved ones or organizations.
Risks Involved
Consider these risks and consult a financial advisor or tax attorney:
- Lose Public Benefits: Eligibility for programs like Medicaid might be affected.
- Tax Implications: Selling could result in a tax liability if the amount exceeds your cost basis.
- Extended Lifespan: Advances in medical care could extend lifespan beyond expectations.
- Potential Conflicts: Heirs may contest the decision; some companies require beneficiary consent for a sale.
Alternative Options
If selling isn't right for you, consider:
- Borrowing Against the Policy: Use the policy as collateral.
- Cashing Out: If the policy has surrender value.
- Exploring Accelerated Benefits: Some policies offer living benefits.
- Loans: Borrow from family or friends using the policy as security.
If you decide to sell, ensure you work with a reputable broker or settlement company to achieve the best outcome.
You can find the original non-AI version of this article here: Selling Your Life Insurance Viaticals and Life Settlements .
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