Whole life policies are purchased with the intention of keeping them for the policyholder's entire life. Life is unpredictable, however, and some events may call for selling a whole life policy to receive a significant cash infusion. Here are some times when you might want to trade in your whole life policy for a life settlement.
Investment Interest Doesn't Cover Premium Payments
Whole life policies are structured so that their premiums start low but escalate throughout the duration of the policy. With some policies, premiums can grow to be several times their initial amounts.
An increasing premium usually isn't an issue, as policies also have built-in investments that grow over time. As the investments increase through compound interest, the annual interest they generate is designed to eventually become greater than the premiums charged. Thus, the interest can normally be used to pay premiums, and policyholders don't need to worry about how much the premiums go up.
Should a policy's investments underperform, however, policyholders can be left with premium payments they can't make. This is uncommon, but at times premiums make it financially feasible to keep a whole life policy.
If you have a policy you can no longer afford the premiums for, a life settlement provides a way out. You'll receive a payment for your policy, and you will no longer need to pay the premiums. The life settlement provider will take over any premium payments that need to be made.
End-of-Life Care Expenses Become Expensive
As medical costs rise, life settlements are becoming an increasingly common way to pay for high end-of-life care expenses. When faced with cancer treatments or long-term care bills that have consumed all assets, elderly individuals can cash in on a life settlement to get more funds for covering their expenses.
No one purchases a life policy intending to sell the policy so that they can afford high end-of-life care expenses. If you're facing a chronic condition that costs thousands of dollars a month, though, this may be the wisest use of your whole life policy. Affording your own care will ease the stress and current financial burden on loved ones who are looking after you.
Death Benefits Are No Longer Needed
One of the primary reasons to purchase life insurance is so that loved ones receive death benefits when you pass away. These are monetary payments made to named beneficiaries, who can be anyone but are most often family members.
When family members experience financial success, your whole life policy's death benefits may no longer be needed. If there's no need for death benefits, there's no need to pay for a policy. A life settlement will give you cash and let you get rid of your policy.
Loved Ones Are in Significant Debt
If the loved ones you've listed as named beneficiaries are in significant debt, getting a monetary gift now might help them more than receiving death benefits later would. A life settlement lets you give that monetary gift by trading in your life policy for a payment that you can then distribute to your loved ones as you like.
In doing this, you will sacrifice a larger death benefit later for a smaller payment now. If the money is being used to pay off debt, accepting a smaller payment now often makes financial sense. Even though your loved ones will get less, they can capitalize on it more by eliminating the interest that's accumulating against them.
Prior to making any decision like this, you ought to consult a tax professional. There are restrictions on how much money can be given to any one person in a calendar year. A tax professional will know how you can give your loved ones as much as possible while minimizing tax bills.
If you're interested in a life settlement
, contact us at Habersham Funding LLC.
