How to Pay Off Debt with Your Life Insurance
An overwhelming amount of debt can be hard to overcome for many. It can take an emotional toll and many people do not know how to get out of this financial problem. This affects more and more adults over 65 years old every year. According to the Survey of Consumer Finances from the National Council on Aging, the percentage of households headed by an adult aged 65 or older with any debt increased from 41.5% in 1992, to 51.9% in 2010, to 60% in 2016. Additionally, the median debt for those households increased from $7,000 in 1995 to over $30,000 in 2016.
Fortunately, there is a solution for seniors called a life insurance settlement. A life insurance policy is considered a financial asset that can be sold to a third party, financial investors for example. It is a straightforward process where a life insurance broker would collect information regarding the policy and the policyholder’s medical records. The broker would them solicit investors and collect offers. The policyholder can either keep the policy or accept one of the offers presented to them.
This a little-known option but it can create a significant income and help with debt problems.
How Much Can I Get?
The selling price can vary but generally speaking, a life settlement value can be four times higher than its surrender value. Our free life settlement calculator can be used to get an estimate in real time. It is important to know that the life insurance settlement value can change based on the policy type and the policyholder’s health status. Reading examples of life settlements can also help clarify the possibilities.
Can I Pay Off any Type of Debt?
According to MSN.com, the top three sources of debt for baby boomers and older are credit card debt, mortgages and car loans. Any of those debts can be paid off with a life insurance settlement. The policyholder received a cash lump sum that he is free to use as he wishes. It is also important to know that the premiums will be the responsibility of the policy buyer.
How Long Does it Take to Sell a Policy?
The timeline varies based on the policy and access to medical records. Investors may need some time as well to formulate an offer. In general, 90 to 120 days is necessary to complete a transaction from start to finish.
Do I Qualify?
Most life insurance policies qualify for a life settlement: whole life, universal life, joint survivorship, and term policies. Being 65 or older usually increase the chances of selling the policy unless the policyholder has seen a significant change in his/her health.
What Else Should I Consider?
Selling a term life insurance policy (or whole life) is an important financial decision and the main downside of a life settlement is the death benefit. More specifically, the death benefit will be paid out to the investor upon the policyholder’s death. Many people over 65 have children and family members that are financially stable but it is still something to consider.
In addition, it is vital to understand the life settlement tax implications after the sale. It is recommended to consult with a financial professional for additional questions.
What is the next step?
If you are interested in selling your life insurance policy, contact us directly and we will analyze your policy, collect documentation, and reach out to investors as soon as possible!
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