Life Settlements Require Careful Consideration

01/25/2010

People who plan to invest in a life insurance policy are likely to hear about life settlements, especially as they approach retirement age.

However, insurance experts note that settlements are not for everyone, and require close attention to detail from those who may be inclined to get involved in such deals. With life settlements, a person can sell their insurance policy to an investor who pays them a specified amount and goes on to cash in the policy after that person has died.

Some states have been taking steps to protect consumers, who primarily tend to be elderly, from some aspects that have drawn concern among regulators, including so-called stranger-originated life insurance policies.

With these things in mind, a recent report in Money Magazine offered some further insights for consumers when it comes to life settlements. For example, consumers are advised to consider whether they are leaving anybody financially unprotected by selling their policies.

Also, the magazine warns that there is no "going rate" for settlements, which makes it that much more important to shop around - including by consulting with the life insurance company about any possible incentives for cashing out as opposed to going with a settlement.

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