Those who have life insurance policies should also be aware of such transactions as life insurance settlements. This recently developed service, which allows insured people to turn their life insurance policies into cash, is often confusingly considered a viatical settlement. This is not correct as viatical settlements together with life settlements constitute types of life insurance settlements.

In order to eliminate the confusion, one should get the gist of life insurance settlements and understand who they are meant for. As previously mentioned, life insurance settlements give policy owners the chance to get their money back from life insurance policies. Such bargains are in favor of the insured person as he/she gets a greater amount than the cash surrender value paid by the insurance company.

But what are the motives for striking such a bargain? The insured person turning to the help of a life insurance settlement is likely someone facing a terminal illness with a life expectancy of less than two years. That person may need an immediate lump sum for covering the high costs of medical care. And dissatisfied by the cash surrender value the person turns to a life insurance settlement, or more exactly, a viatical settlement.

But for those insured seniors who have life expectancies for more than two years, another type of life insurance settlements, called a life settlement, is used. This settlement not only provides cash money for an unwanted or unneeded policy, but also frees the policy owner from additional premium payments that he/she can’t afford anymore.

Photo: © madstfri

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