Term insurance is a type of life insurance policy that provides coverage for a certain period of time, or a specified “term” of years. After that period expires coverage at the previous rate of premiums is no longer guaranteed and the client must either forgo coverage or potentially obtain further coverage with different payments and/or conditions. If the insured dies during the time period specified in the policy and the policy is active – or in force – then a death benefit will be paid to the beneficiary. It is a least expensive way to purchase a substantial death benefit on a coverage amount per premium dollar basis over a specific period of time.
It is the original form of life insurance and can be contrasted to permanent life insurance such as whole life, universal life, and variable universal life, which guarantee coverage at fixed premiums for the lifetime of the insured person. Term insurance is not generally used for estate planning needs or charitable giving strategies, but for pure income replacement needs for an individual. Many permanent life insurance products also build predetermined cash value over the life of the contract, available for later withdrawal by the client under specific conditions.
Term Insurance Life Settlement:-
A term insurance life settlement is basically a transaction between the policy owner and the policy provider. A person who is in possession of an unneeded or unwanted life insurance policy can sell his policy to a Settlement Provider for more than the cash value offered by the life insurance company.
Why People Sell Their Policy?
There are number of people who sell their insurance policies because due to their financial problems or for any other reason. Typically, the premiums of the insurance become unaffordable for the policy owners and sometimes some policies owners hold a number of polices and want to eliminate one or more policies. May be they do this because the need some money to pay their medical bills or other type of expanses or maybe they want to replace the policy with a survivorship type of policy. All in all, the sale of the policy allows the policyholder to maintain a desired standard of living and live out his final years with dignity. Personal welfare and comfort rank high on the policy sale consideration list.
Policy Consideration for Owners and Buyers:-
Broadly speaking, people with universal life policies make up the majority of current policy sellers. However, because the industry has matured in its ability to perform accurate financial analysis and predictions, term insurance owners are now able to come to the table and receive consideration for what was once considered a worthless form of insurance.
Heretofore, their only options were to let the term-life policy lapse or convert at a premium increase. The only party benefiting from this travesty was the original insurance company. They received premiums for a certain number of years and because of the lapse, they faced no obligation to pay the face amount.
This meant the policyholder simply lost everything no matter how much money he now needed to pay medical bills, living expenses or meet long term care obligations. Thanks to the secondary market, Life Settlement, the opportunity for term life insurance owners has improved. They too now enjoy liquidity almost on par with whole life policy owners.
Since they can be sold with a life settlement as long as the policy still can be converted, their face value can be lower. This has transformed them from a worthless program into one gaining value in the eyes of the Settlement Provider.
Term insurance life settlement is, and will remain, an individual choice. It may not be right for everyone, but it is an important option on the personal welfare menu that could possibly increase the return on a policy owner’s life insurance program.