7 Myths Exposed About Life Settlements

Trying to navigate your financial future can be difficult to understand, especially when you are trying to develop a plan of action relating to your life insurance policy. You may have come across the life settlement option but you are hesitant to make a decision because you have stumbled across many questionable things during your research. However, life settlements are one of the easiest ways to take control of your finances and they aren't as scary as they may seem. First, let's get the basics out of the way: a life settlement is a cash payout for an existing life insurance policy from a third party. The payout will generally be less than the face value of the policy but it tends to be more money than surrendering it back to the insurance company.

With that said, check out these seven myths that have been cleared up so you can understand life settlements better!

I have to be terminally ill for a life settlement

No, that is false. A life settlement is for healthy seniors who are aged 75 years old or older with a life insurance policy.

A viatical settlement and life settlement is the same

No, they are two different things. Viatical settlements are for individuals who have terminal diagnoses or life-threatening conditions like cancer, Lou Gehrig's disease, etc. Life settlements are based on age and not health.

I can only take my life insurance policy cash surrender value

No, that is incorrect. Many people with life insurance policies are under the assumption that they can only receive a cash surrender value. However, there are other options available like selling a life insurance policy for cash value that typically is more than the surrendered value.

Only whole life policies can be sold

False. Various kinds of policies qualify for life settlements like universal, joint survivorship, whole, term and other life insurance policies.

My policy is unaffordable so I need to have the policy lapse

That is incorrect because there are plenty of options available. A life settlement transaction can typically be completed within 4 to 5 weeks or sooner. You may be able to sell your policy before you consider walking away with nothing.

There are restrictions on how I can use my life settlement funds

False. Your payout from your life settlement can be used in any way you desire. You could pay down debts, you could use the funds to go on vacation, you could use the money for a different investment opportunity – you have the freedom to use them however you wish.

The life settlement process is hard to understand

The life settlement process is easy: the applicant fills out paperwork and waits for an offer. If the applicant likes the offer, they can accept the pay out and receive their funds.