A life insurance policy is intended to provide your family with a sizable amount of money should you meet an untimely death and, as such, can be said to be a something of an ultimate bonanza – a pot of gold, if you will. Most people, however, think the only way to get money from a life insurance policy is to die but there is another way should your circumstances change and that is called a life settlement. This article provides some insider insights on how to go about negotiating the maximum payout on such a settlement. Words: 851
Arthur Adams (ampminsure.org/life.html)
Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) has edited the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Adams goes on to say, in part:
Many changes in your life may compel you to choose a life settlement and you can do one of three things:
- keep your life insurance policy as a form of investment and reduce the amount of coverage,
- let your policy lapse or
- surrender it in order to get the cash surrender value – called life settlement.
Many companies purchase life insurance polices as an investment paying you the upfront fees and then undertake to make payment of the premium amount. The money that they will pay depends on various factors but it usually is about 15% of the face value of your policy although this can be negotiated higher if you take the right approach as discussed below.
You need to know that you cannot sell each and every life insurance policy:
- the age of the policy holder has to be 55 years or more
- the life expectancy of the policy holder has to be between 2 and 12 years
- the insurance policy must be transferable and
- the policy should be either a variable life insurance policy, universal life insurance policy, term life or second-to-die policy.
By selling off your policy, you will get less money than if you had continued the policy until your death and, therefore, you should be VERY cautious when arranging a life settlement. It is EXTREMELY important that you make yourself aware that the commission on a life settlement can be as high up to 33% but that the insurance agent and the insurance company who is buying your policy negotiate the actual commission payout to the client between themselves and that this is hidden from the client.
In life settlement discussions with an insurance agent keep in mind that he/she will always recommend that you accept a settlement payout from a life insurance company from which he/she will get the greater share of the available commission – and that company will most often be the issuing company – but that there will be other interested buyers of your policy. Therefore, so as not to be taken advantage of in such a brazen manner I recommend that you approach such a settlement payout process as though you were buying or selling a car!
In the all important negotiation process, may I suggest the following approach:
1. Tell your advisor that:
- you know what the payout commission is on your particular policy and, as such, are looking to get the maximum payout settlement and that
- you will be getting competitive quotes from other life insurance agents as well as him/her.
2. Get settlement payout offers from three or more other life insurance agents.
3. Negotiate with all the agents previously contacted to see if they can exceed the best offer.
4. Settle on the agent who will offer you the highest settlement.
Keep in mind that life settlement is not meant for everyone. Be sure that your life insurance needs have been properly fulfilled and you have carefully taken into consideration the advantages and disadvantages before making any decision. That being said, should you decide on pursuing a life settlement make sure you realize a maximum return.
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