Selling a life insurance policy comes with benefits and tradeoffs, and seniors should understand the potential risks before making a decision. The most significant risk is the loss of the death benefit, which means beneficiaries will no longer receive the payout when the insured passes away. Some families may need to discuss this outcome carefully.
A settlement also requires sharing personal and medical information with licensed buyers, which some sellers may find uncomfortable, although strict privacy rules protect their data. Settlement proceeds may affect eligibility for needs-based programs such as Medicaid, so seniors in those situations should consult a professional.
There may also be tax implications, depending on factors such as the policy’s cost basis, cash value, and the amount received. The settlement process can take several weeks, which may be a concern for people who need immediate funds. Some policies may receive lower offers than expected, especially if premiums are high or the policy has certain structural limitations. Working with licensed, experienced professionals helps reduce risks such as fraud or unfair pricing.
While life settlements provide real financial value, seniors should weigh these considerations carefully to ensure the decision supports their personal and financial goals.
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