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The life insurance settlement industry, derived from ordinary life insurance policies, is relatively new. When a policy holder's life situation changed to such a degree that his policy was outdated, he could take the cash value offered by a third party, instead of the insurance provider that sold him the policy. The concept of life settlements began in Canada a few years back, and rapidly spread to the United States, and then on to most of the world. Now, most of the major insurance firms, and a few major financial investment agencies have begun programs geared toward life insurance settlements.

Life settlement is a secondary market in life insurance policies. In the case of insurance companies before the advent of life settlements, if a person was interested in cashing out his policy, he had no other options other than settling with the insurance company. There are many ways that a policy holder's life situation could change. Loans are repaid, or some of his assets that contribute to his high net worth are sold off. The change of life situation changes the requirement for the life insurance policy. In many cases, the policy holder is over insured. In comparison to mortgage refinancing, life settlement is like refinancing your life insurance policy with a third part financial institute. You dont pay property insurance when your equity is 20% or more of house value. For life insurance, the policy holders have option to sell the unwanted or over-insured part to a third party company and invest the extra cash value of that policy to other investment opportunities more in line with his financial plan. It is now possible to basically sell the policy to the highest bidder, and take the cash settlement, called the life settlement, and reinvest it in a more appropriate policy.

Life insurance purchased on a term basis only cover a specific period of time, usually ranging from 5 to 25 years. If the insurer opts for a permanent life insurance, then the period of coverage lasts until the death of the individual at any age. If you have a life insurance, your family will have a protection to continue paying common expenses, long-term debt and eventual relocation if needed. You must be aware of the terms of the policy to make sure the amount to be paid will be enough to pay expenses and preceding costs.

Your life insurance can replace lost income and help you to pay off or eliminate your debts, if you take life insurance, and later sell the policy to a third-party buyer willing to pay the premium on the insurance. The drawback here is that such buyer will become the beneficiary of the life insurance settlement after you die.

Natalie Aranda writes on home and family. The life insurance settlement industry, derived from ordinary life insurance policies, is relatively new. When a policy holder's life situation changed to such a degree that his policy was outdated, he could take the cash value offered by a third party, instead of the insurance provider that sold him the policy. The concept of life settlements began in Canada a few years back, and rapidly spread to the United States, and then on to most of the world. Now, most of the major insurance firms, and a few major financial investment agencies have begun programs geared toward life insurance settlements.