Life Insurance Settlement
When calculating a single life settlement option, many different variables must be taken into consideration, including the policyholder’s age and general health.
A Closer Look at How Life Settlements Are Calculated
When you no longer need your life insurance policy, letting the coverage lapse isn’t your only option. A life insurance settlement allows you to sell the cash value of your policy to a third party. That party will then take over the premiums and become the beneficiary once you pass away. If you have recently considered selling your life insurance policy, you should spend some time researching how the settlements are calculated.
Value of the Policy
The overall value of the policy is the first variable that the settlement broker will take into consideration. For a bigger policy that was designed to cover college tuition or a home loan, the settlement is going to be larger. Most policies will be considered, but some brokers only deal with clients who have a policy that is worth $100,000 or more. Policyholders who have taken out loans against their insurance will receive smaller settlements as well.
Age of Policyholder
One of the biggest benefits of a single life settlement option is the fact that it will become more valuable as you grow older. An individual who is 85 years old will typically be offered a much larger settlement than someone who is 65. You can receive a life settlement at any age, but the average broker will only deal with clients who are in their senior years. Your overall health plays a role as well, and most policyholders must have a physical carried out at some point during this process.
The settlement company will also need to determine the maintenance cost of the policy. You might no longer be happy with your life insurance because of the premiums, and those payments must be made by someone, or the policy will expire. A policyholder who is spending huge amounts on their life insurance every month generally won’t be offered a very large settlement. The premiums must be compared to your age and health as well. Larger premiums aren’t as important if the policyholder is older or not in good health.
The lump sum that you receive from your life insurance settlement can be used to pay off outstanding bills or take that vacation you have been dreaming of.