What is a life settlement broker and what do they do?

A life settlement broker is someone that can help others to receive a cash settlement for an existing life insurance policy. Many people are unaware that this option exists and many have never heard about it before. There is a method that can be used to get money from a policy before the person dies that will result in a cash payout.

Policies usually have two different kinds of endings. One is that the policyholder dies and the payout is made to the beneficiary or beneficiaries. The other one is that the policyholder stops paying on the policy premiums. Some policies have a cash surrender value and this is an attractive feature of whole life policies. It can be known by different terms that include surrender value, policyholder’s equity or just cash value. There can be surrender charges incurred and any loans against the policy or interest from the loan will be deducted from the policy before money is given to the policyholder.

Working with a life settlement broker instead of surrendering the policy may work out to be a better option for many people. In this case, the company will take over the policy and give the policyholder a cash-out for it. This will not be equal to the amount of the policy that would be paid as a death benefit but it is usually for more money than what the client might obtain had they surrendered it to the insurance company.

People may have different reasons for using this method. People may have other policies and no longer need this particular one. They may want to stop the monthly or yearly premiums on this kind of policy because they have reduced income or changes to economic circumstances. Some people need to obtain cash to pay bills, or use it to accomplish various goals that they may have in mind.

Anyone that is considering using this kind of service will want to look for specific characteristics in anyone that they work with. Some states require that these providers have some kind of licensing within the state.

Another thing to look at is to find out if the settlement will have an impact on income taxes. The best way to find out the specifics it is to discuss it with a trusted tax advisor. Another detail that can be important is that this may impact people that are on government programs such as eligibility or being taxed for income over a specific amount.

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