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. When a 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.
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 time. 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 to pay it takes about one week.
There are several choices an insured has when it comes to the payment of proceeds.
One Lump Sum
More often than not the proceeds 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
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 achieved. 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. S/he 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 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.
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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