When you think about it, the life insurance settlement option chosen by you is vital when it comes to what you really want your policies to do. Most life insurance agents don’t discuss any life insurance settlement option with their clients in detail. The online life insurance salesmen give this matter even less consideration…
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You should give special consideration as to whether or not this policy is intended for family protection or for another specific need. Is this policy intended to provide an income for your family or business…or is the need only for a lump sum. Is there a need for a retirement income…whether through an annuity or a permanent life insurance policy. Is the policy intended to pay estate taxes…in which case a lump sum would probably be an exact fit. What of business life insurance, is this policy intended to fund a buy-sell agreement or is it for key employee insurance ?
Regardless of the purpose the life insurance settlement option you decide on is an important decision and is worth deep thought and consideration.
You will need to choose a life insurance settlement option from one of the following.
You can have the proceeds paid out in One Lump Sum. This is an advantage if the need is a lump sum need…like for last expenses etc. This can be wrong option if the intent is to secure the family until the children finish school. It is better to use an income option to fulfill this need.
- Income OptionsThe proceeds of the life insurance policy can be paid in the form of a Life Income. Let us take a situation where your desire is to have sufficient income paid to your spouse for the rest of her life…the Life Income Option is ideal. Incidentally, there are several Life Income Options.When setting up your pension you can arrange with the insurance company to pay out the income until the last person named dies. This is referred to as the Joint And Last Survivor Settlement Option. Usually…this is used for married couples.Another life insurance settlement option is the Interest Income Option. You say to the insurance company, pay me the interest each month and keep my principal intact. I like this option especially when the principal is sufficient to provide a decent monthly income.Another option is the Fixed Period Income Option. You say to the life insurance company, pay me whatever income the lump sum will provide over the next seven years, for example. The insurance company will do exactly that. Let us say you have a youngster about to enter medical school and you want to use this income to guarantee that the funds are available to take care of these costs. this would be a good life insurance settlement option to use for this purposeThe Fixed Amount Option is similar to the Fixed Period Option as far as the end result is concerned. In this case, however, you decide on the amount of income you desire each month and the insurance company will calculate how long this income will last.This is how each life insurance settlement option will work.
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