If you are a life insurance policyholder, you may have previously thought about cashing the policy in and taking a trip around the world or perhaps paying off your home.
The main reason that people are reluctant to cash in life insurance policies that have accrued a significant monetary value is that there are typically steep and severe penalties related to cashing in these policies before they mature. However, there is a way to cash in an insurance policy and still get more money than the policy’s cash surrender value and get around those rules.
By using a little-known method called a life settlement, you can have your insurance cake and eat it too and get cash for a senior’s life insurance policy. In other words, you can cash in your insurance policy and recover much more than the just cash surrender value, not incur any penalties, and convert the money tied up in the policy into liquid assets that you can use to pay off bills, use for expenses, or treat yourself to that trip that you have always wanted. Perhaps you will find, as many older Americans do, that this is a way to enjoy the money that you have worked hard for while you are still able to enjoy it.
Here is how the life settlement process works:
- You sign over your life insurance policy to a life settlement broker.
- The brokerage agency pays you more than the surrender value that the insurance company would pay if you cashed it in.
- You turn the policy over to the broker and they keep paying the premiums until you die and they collect the policy’s benefit.
- You can then use the money that the broker pays you today as you wish.
The ability to sell your insurance policy as a transferable asset is a right that has been allowed for quite a long time and stems from a 1911 Supreme Court ruling called Grigsby v. Russell. This case has provided the legal precedent that insurance policy holders have the private property rights to sell an insurance policy as any other asset to a third party, such as a life settlement broker, so that they can liquidate the assets that are tied up in the policy.
If you still have a lot of living to do, have bills to pay, or maybe want to go ahead and settle your affairs so that your children will not have to, then you might want to opt for selling your policy through a life settlement. It is much more favorable for the policy holder than simply cashing in the policy and incurring all of the penalties for early surrendering. Clearly, most people want to earn as much as possible for their insurance policy investment, so a life settlement is obviously the prudent choice.