Life Settlement Strategies in the Age of Covid
With Covid-19 making its mark on humanity in late 2019 and all of 2020, the world in which we live has changed – and so have many businesses. Social distancing, masks, and reduced travel & entertainment have become the norm for many people.
Besides the health detriments of Covid-19, it has also taken a serious hit on the economy worldwide. Businesses have closed, people are out of work, and many are looking for a way to help cover the bills and cost of living in such a difficult time.
If you’re facing uncertain times with your health and financial status as a result of Covid-19, rest assured that you’re not alone. One such way that some are choosing to help mitigate risk and cover their bases is through a life settlement. During such uncertain times, strategizing how you can use your life insurance policy as leverage can be an important step to take, and can help put you back on the path of financial stability.
In this article, we’ll discuss the following:
- A brief overview of what a life settlement is and how it can be beneficial to you and your family
- How to determine your own eligibility for a life settlement
- Strategies you can take so that you can maximize your benefit during the Covid-19 crisis
What is a Life Settlement?
Simply put, a life settlement occurs when you sell your life insurance policy to a third-party who wasn’t the original owner. The result is that you are able to cash out immediately, and usually for a larger amount than what you would get if you were to just surrender the policy.
There are many reasons to opt for a life settlement. A few popular reasons that influence why someone might choose it include:
- Struggling to make payments on the premium, at risk of needing to surrender the policy or cancelling it altogether
- The policy is no longer serving the original purpose, such as when the beneficiary is no longer dependent on you or has passed
- The policy holder needs money now, often because of economic hardship or complications such as from the ongoing pandemic
Covid-19 has made more people think about whether or not a life settlement c
ould be the right avenue for them. By checking our eligibility guidelines below, you can find out if a life settlement can help you get relief from the ongoing pandemic and help ease the burden of impending financial or health troubles.
Who is Eligible for a Life Settlement?
While Covid-19 has complicated our day-to-day lives, the eligibility requirements for life settlements have largely remained the same. They are:
- Typically reserved for people over 65, with additional leverage for those that are 75 or older
- Those that carry a death benefit of at least $100,000
- People who are facing health complications or terminal illness
There are many different kinds of life settlements that can fit a variety of ages and needs. The most common eligibility factors are that you are at least 65 and you have a death benefit of at least $100,000. To see the full list of factors that influence whether or not you are eligible for a life settlement, and the different types of life settlement outcomes, see here: Who is Eligible for a Life Settlement.
After you have an understanding of what a life settlement is and if you are eligible, it’s time to consider strategies you can take to maximize your benefit, especially in the age of Covid-19.
Strategizing for a Life Settlement
This is not the first time the life settlement market is responding to a global crisis. It underwent a similar time during the 1980s AIDS pandemic, when terminally ill patients would liquidate assets to have more cash.
Life settlements remain available for those who face terminal illness, but have adapted to accommodate seniors over the age of 65 who may face health challenges or fluctuations associated with a global economic crisis. Ultimately, strategizing for and determining what to do with your life insurance policy during such a time depends on a number of factors.
Have You or Your Family Been Impacted?
If you or your family has been impacted by the ongoing crisis, this could impact your approach in a few ways:
1) With an added need for cash now, you may choose a life settlement option to help cover existing expenses and ease any current financial burdens.
2) A life settlement option could be more useful to you in the event that your existing beneficiary has passed as a result of COVID-19 and will no longer be able to receive your death benefit.
How you have been directly impacted could be a strong factor influencing your decision about what to do with your life insurance policy. Risk and uncertainty is the next area to examine.
Do You Face Uncertainty As a Result of Health or Financial Problems?
There are a number of ways you could face uncertainty now more than ever before: a loved one has lost their job, you have discontinued work yourself (full-time or part-time), or you believe your family may need additional financial assistance if they themselves face unexpected health issues.
COVID-19 has put strain on all of us, and it’s important to assess your options and see if a life settlement would be more beneficial to you and your loved ones now.
Are You Considering Lapsing Or Surrendering Your Policy?
If ongoing financial issues are impacting your ability to make payments, or if you’re considering putting them off in order to cut expenses, then you may want to strategize for a life settlement instead.
Choosing to lapse your policy by not making payments anymore means that your insurance company will not pay out any benefit at all in the case of death. Surrendering your policy means that you will only get a small percentage back of what you paid in.
On the other hand, opting for a life settlement can help you get the most money possible right away… A much better option than lapsing and much more impactful than surrendering it.
No matter what you decide to do, it’s important to have an outline of a strategy that you’ll follow in the case of certain events happening, especially in such uncertain times. Preparation is the key to a successful and beneficial outcome for all involved.