There are many ways that a policyholder can get rid of an unwanted life insurance policy, including a life insurance settlement and a viatical settlement. While the former is a relatively new concept, it can be confused by the latter because they both involve the sale of a life insurance plan to a third party. However, there is a huge difference between these two methods, and it is important to know the difference in order to select the best possible solution for your specific situation.
A senior life settlement is a way for a policyholder to sell their life insurance plan to an individual or company for an amount that is greater than the policy’s cash surrender yet less than the net death benefit. With a senior life settlement, the policyholder is not under any specific requirement and the funds can be used to fulfill a wide range of financial or estate planning objectives. When life settlement brokers come in the picture, there may be numerous individuals or companies all bidding for the same policy, which in turn results in the policyholder receiving the highest possible amount for his or her policy.
Unlike life settlements, viatical settlements can be transferred or sold only when the policyholder has a terminal disease. If the policyholder has a terminal disease, he or she can choose to sell the life insurance policy at a discount rate from its full value for instant cash. In the case of a viatical settlement, the buyer cashes in the entire amount of the policy when the original policyholder dies.
