Life Insurance Settlement
How Proceeds Are Distributed
Life Insurance Settlement. Over the years I have paid many a claim upon
the death of my clients. Everything always goes smoothly for me in these
cases. The carrier usually wants proof of death and they also want to
be assured that the beneficiary is who s/he claims to be.
beneficiary calls to let me know of the death of an insured I always try
to make it to the funeral. I also set up an appointment to help them
get paid as quickly as possible. I advise them of the requirements of
the life insurance company at that point.
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To make certain that I don't miss anything I confirm everything with the
claims department of the company before I go on the appointment. I then
advise them that I will call from the beneficiaries home or place of
business to to make certain all will goes well. As long as all the
requirements are met the proceeds will be paid in a very short period of
Most of my time on the field I was with the Northwestern Mutual
Life Insurance Company, now Northwestern Mutual Financial Network.
Because they are so thorough at the time of application for the policy
when the time comes for a life insurance settlement it takes about one
Life Insurance Settlement Options
There are several choices an insured has when it comes to the payment of proceeds.
- One Lump Sum
More often than not the proceeds, or life insurance
settlement, of the policy is paid in one lump sum. If the policy is
small that is fine. When the policy is for a large amount I don't
recommend payment in this manner. It is much better to provide an income
rather than a lump sum. Income can be paid in many different ways.
There are many options.
- Interest Income Option
A great life insurance settlement option is the interest
income option. Putting a large sum of money into the hands of one who is
not used to handling large sums can result in waste. As a result the
intentions of the insured goes for naught. His or her plan is not
The beneficiary of the policy can leave the principal with the
company just taking the interest earned at intervals. The principal
remains in tact until you decide to take it.
- Fixed Amount Income Option
The beneficiary has the option of taking the money in the form
of a fixed income. The insured can stipulate that this is how it should
be paid or s/he can leave that up to those who receive the money.
may say, "pay out $x per month to my family, named person or persons,
until the proceeds are exhausted". The actual amount paid is usually
considerably more than the lump sum death benefit itself.
- Fixed Period Income
This life insurance settlement option is similar to the fixed
amount option in that the amount paid out is the same.
You say to the
life insurance company - "pay this money to them in equal amounts over
the next 10 years", for example.
- Life Income Option
Some people may choose to have life insurance proceeds paid in
life income form. This is particularly effective when dealing with
large amounts. There are several life income options to choose from.
With this life insurance settlement option you have a few
alternate choices. You can have income paid for life but when the
beneficiary dies no more income is paid. This is a way of providing the
largest life income but I see it as a gamble.
I much prefer to have the
beneficiary take an income for life but with a certain, or guaranteed
period. Let us say the person receiving the income wants a life income
20 years certain. The income will be paid for as long as the beneficiary
lives but if s/he dies after 5 years, for example, the income still
must be paid out to an heir for an additional 15 years.
20 years certain
was an example you may choose 5 years, 10 years, or 15 years certain.
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Life Insurance Settlement