Life insurance has been sold for many years for the purpose of receiving the money once the policyholder dies.
Although critics disagree with the morality of watching and waiting for someone to die so that the money from their insurance can be received, this method has been long used and part of the world now. These days, people live longer and as such, require certain retirement plans and health care in their older age. As such, life insurance is now also sold in the manner of providing for those needs. If the money is loaned or taken out by the insured before their death, it can be used for retirement plans or other needs, though they cannot enjoy the death benefit anymore.
Upon buying the life insurance, you must make the best decision possible as you may regret it and wish to sell it later on.
An example can be senior citizens who choose that the death benefit should go to their children upon buying the life insurance, but after some time passes, matters change in a way that leaves them not needing or wanting to leave the death benefit for their children, thus coming to the decision of selling their life insurance. This is why all aspects should be considered before purchasing the insurance.
Life insurance was first sold to AIDS victims who only had months to live and wished for some money and was able to receive it by selling their life insurance. After medicine was acquired to help these patients live as long as years or decades, this business was not so appealing anymore. A more recent event that has tarnished the image of life insurance is those salespeople who pushed senior citizens into agreeing to receive some money and have a third party purchase a life insurance in their name, pay its premiums, and receive the death benefit upon their deaths. This event, also known as the stranger originated life insurance, is not a healthy business and has been frowned upon by many, including other insurers.
One of the many faults of this transaction is that the seniors who agree to receive the payment of the stranger originated life insurance are not first fully told of the consequences. These consequences include not qualifying for many public benefits anymore due to receiving this payment and taxes that are due them now. Insurers who disagree with this method also point out that paying the death benefit for every life insurance policy is not beneficial. Many people who acquire life insurance opt out before the death benefit should be paid, which is in the interest of the insurance company.
- Some rules that have been issued to fight off these transactions of stranger originated life insurance include the creation of a gap of many years between when the insured dies and when the death benefit can be acquired by a third party. Other places have made such transactions completely illegal, forbidding it from taking place at all. Besides the companies whose practices are a threat to insurance businesses of others, the economy is also a big set back in this industry. Having a depression will affect everyone and recovering from it can be very slow and difficult.
- Companies in the life insurance industry must keep in mind that the public and media can easily latch on to any unfairness they impose upon their customers and that their reputation will be in ruins. For example, many companies have been minimizing the number of years that the consumer has yet left to live and since these life insurance policies are sold to third parties who will have to wait longer to collect the death benefit, the profits that are supposedly made by them is nothing compared to the premiums they will have to continue paying for in a longer period of time due to their clients living longer than estimated by these companies.
Senior citizens who decide upon selling their life insurance policy should keep in mind that using the advice of the insurance agent who sold them their life insurance or even a financial adviser’s help should be requested. Other people who are affected by their decision to sell their life insurance should also be informed and their support or understanding should be acquired beforehand. Asking for proof and making sure that you are not being tricked is also important.
These transactions usually take a span of two weeks or more, depending on how complicated the process may be. Going through a medical checkup is also needed. Lastly, the payment due you should be made as a lump sum amount and not monthly or annually, as the taxing would be different.