How are senior life settlements different?

You may have heard about structured settlements and senior life settlements. Although the two terms are similar and are indeed related, they can easily be confused. This article will help you understand what exactly senior life settlements are and how they differ from similar or related terms.  

A senior life settlement is a transaction wherein a senior citizen sells his or her life insurance policy for a lump sum. It is also known as a life settlement or senior settlement. A settlement used in this context means a sale or transfer of ownership, rather than a series of staggered payments (a definition that arises mainly in the context of compensatory judgments from lawsuits)..

What is a senior life settlement? 

A senior life settlement has several distinguishing factors:

First, as the name implies, the person entering into the transaction is a senior citizen, aged 65 years old and above.

Second, the senior citizen owns a valid individual life insurance policy.

Third, there is on the part of the policy owner a perceived need or desire to sell this policy, for a variety of reasons which we’ll take up later.

Fourth, the life insurance policy is sold to a third party, often known as a life settlement provider. This is because a life insurance policy cannot be surrendered back to the company that issued it, and because selling it back to the company will net a very low value, translating to a financial loss for the policy owner.

The buyer of the policy, or the life settlement provider, assumes responsibility for paying the rest of the remaining premiums on the policy. In return, the life settlement provider becomes the beneficiary of the insurance policy upon its maturation.

What are possible reasons for entering into a senior life settlement?
What are the qualifications for a senior life settlement?

Senior life settlements aren’t automatically dispensed to just anyone who owns a life insurance policy. There are several mitigating factors. Qualification for a senior life settlement or not depends on the type of life insurance policy, the age and health condition of the insured individual, and the amount of premiums that must be paid each year.

The most important aspects that determine the amount of the senior life settlement are the combined effect of the age and health of the insured. In the event that the life insurance policy is a survivorship coverage, the age and health of both insured persons are considered. Seniors in their seventies, as long as they are in fairly good health, also qualify. Seniors as young as 65 years old if their medical history and other health circumstances can justify a limited life expectancy.
 
The cost and amount of the life insurance premiums is also vital in determining the amount that will be offered in a senior life settlement. The general rule of thumb is, the lower the annual premium amount to be paid, the higher the settlement amount.
 
Most kinds of life insurance policies can be sold in a senior life settlement, including but  not limited to: term, whole, universal, individual, group and corporate life insurance policies..

NEXT ARTICLE >>