Introduction
Retirement can be costly these days. People are living longer, and their healthcare expenses are going up. Many seniors aren’t financially prepared. A report from TD Ameritrade in 2020 found that a lot of seniors don’t have much money saved. For example, 33% of those aged 70 to 79 have less than $100,000 saved. The situation is even worse for those aged 60 to 69, with 38% having less than $100,000 saved. In this context, life settlements are becoming more popular as a solution to help seniors who need money. A life settlement is when you sell your life insurance policy to someone else in exchange for cash.
Common Myths About Life Settlements
Myth #1: Life Settlements Are Illegal
Fact: Life settlements are legal in most states and are regulated. The legal foundation for selling life insurance was established in the early 20th century when the Supreme Court ruled in favor of a man named Grigsby who purchased a life insurance policy from a patient who needed money for an operation. Life settlements are regulated in 43 states. These regulations aim to protect people from fraud.
Myth #2: You Need to Be Terminally Ill for a Life Settlement
Fact: You don’t need to be seriously ill to do a life settlement. To do a life settlement, you usually need to be at least 70 years old and have a policy worth $50,000 or more. Some people might confuse life settlements with something called viatical settlements, which are for terminally ill individuals. Viatical settlements are different from life settlements because they are faster and have different tax rules.
Myth #3: There Are Rules on How You Can Spend the Money from a Life Settlement
Fact: There are no specific rules about how you can use the money from a life settlement. You can use it in various ways. You might choose to pay off debts, cover healthcare expenses, fund your living costs, create an emergency fund, invest the money, or even treat yourself to a vacation.
Myth #4: Surrendering Your Policy Gets You More Money
Fact: This is a damaging myth. Life settlements typically provide more cash than surrendering your policy. You might get up to 60% of your policy’s death benefit through a life settlement. The life settlement industry exists because investors are willing to pay more than the surrender value. It’s important to compare the two and decide for yourself.
Myth #5: You Need to Be an Expert to Offer Life Settlements
Fact: You don’t have to be an expert to offer life settlements. Financial and legal advisors who might not be very familiar with life settlements can still help. They just need to understand that life insurance can be sold for more than its surrender value. If they’re unsure, they can involve experts who can provide information and estimates.
Conclusion
Knowing the facts about life settlements is crucial, especially for seniors who might need financial help. With myths and misinformation out there, it’s essential to make informed decisions about your life insurance. Don’t rely on hearsay or misunderstandings. Consider the real options available to you and your financial future. If you have a life insurance policy you no longer need, find out what it’s truly worth by reaching out to Moss Life Settlements experts who can guide you in the right direction.
