What is a life settlement?
A life settlement is when one sells their life insurance policy to a 3rd party for an amount that exceeds the cash value of the policy (and is less than the face value of the policy).
When a policy is sold as a life settlement, the seller gets a cash payment (usually a lump sum) and the purchaser pays all future premium payments and collects the full benefit upon the death of the seller. Most states (including Florida) highly regulate the purchasing of life settlements.
Why would someone consider a life settlement?
There are many reasons why someone would consider selling their life insurance policy such as...
Their insurance is no longer needed
Their insurance is no longer wanted
They no longer want to (or are unable to) make the premium payments
They are considering surrendering the policy anyways (and want more money)
The policy is about to lapse and they can make some money from it
Their financial needs change
They need/want the money now
They had a change in life circumstances (death or divorce)
They have better options for the money
Sometimes it just makes sense
How does someone qualify for a life settlement?
Not everyone qualifies for a life settlement. In order to be a candidate for a life settlement, one must be at least 70 years old (unless significant health issues) with a permanent (or convertible term) insurance policy that fits the criteria of the life settlement company. The insurance policies can be reviewed free of charge, with no obligation to purchase.
What criteria is used to determine the value of a life insurance policy?
The life settlement companies are looking for a long term safe and profitable investment. In order to do that, they look at several factors including...
The amount of insurance
The current (and future) premium payments
Amount of cash value in policy (less is better)
Rating of insurance carrier
Type of policy
Expected life expectancy of insured based on...
Age of Insured
Sex of Insured
Health of Insured
Who is an ideal candidate for a life settlement?
Not everyone is an ideal candidate for a life settlement, but an ideal candidate is...
70 years of age (or older) (or younger with significant health issues)
with a life expectancy of 3-15 years
Has a permanent (or convertible term) life insurance policy
That is beyond the 2-year contestibility period
with a death benefit greater that $100,000
What are the steps to get qualified for a life settlement?
The best way to get qualified for a free no obligation quote for a life settlement is to...
Fill out the form on our site.
We will collect some information about you and your insurance policy.
We get a preliminary indication if the policy qualifies you to be a possible candidate for a life settlement
If so, we have a more in-depth look at the policy conditions as well as your health conditions (in order to get the you as much money as possible).
How long does this process take?
The process of selling your life insurance as a life settlement can take several months to as much as 6 months depending on the response time of the many entities that are involved. However, with cooperation from everyone, the time can be considerably mitigated.
What types of policies qualify for a life settlement?
Any of the following policies can qualify for a life settlement...
COLI (Corporate Owned Life Insurance)
Group life (that can convert to an individual policy)
Is it better to surrender an insurance policy for the cash value than get a life settlement?
Surrendering a policy for the cash value is always an option however, that can be a very costly decision. Almost always the surrender amount of the policy is a small fraction of the amount that can be earned from a life settlement. If you are looking for the most money possible, it is best that you check the offers of a life settlement rather than simply surrendering the policy.
Who actually buys the policy when one is sold as a life settlement?
When a life insurance policy is sold as a life settlement the insurance policy is purchased by licensed life insurance provider companies. These companies specialize in purchasing a wide range of assets to balance their investment portfolios. Most of the time the policy is sold to institutional investors as a safe, secure long term invsetment.
Do I have to continue to pay the insurance premiums after I sell my policy?
No, any policy the we sell for you will no longer require that you pay any premium payments whatsoever. There are no hidden fees or costs, all future costs are absorbed by the life settlement compnies.
How much will the process of selling my insurance policy cost me out of pocket?
You will not have to pay any upfront fees to sell your life insurance. There are also no minimum credit scores or income level requirements to qualify. Furthermore, there is no obligation to accept a contingent offer once received.
Who makes the continual premium payments after a life settlement is finalized?
In almost every case, the life settlement company/ new owner will pay all future fees including premium payments.
Can someone sell their insurance policy on their own?
Life Settlements are complex legal transactions that require a licensed life settlement agent. There and regulations and strict compliance that must be followed. Professional assistance is critical to both maximize the value of the policy as well as assist in the complicated marketplace.
Is it even legal to sell a life insurance policy?
The U.S. Supreme Court ruled that a life insurance policy is considered personal property. You are absolutely allowed to sell, trade or gift a life insurance policy.
Is my information confidential?
Your information is absolutely confidential. Any information obtained cannot or will not be be shared with anyone without your written approval. The life insurance settlement industry takes privacy issues very seriously.
Are there any restrictions on how someone can use the proceeds from a life settlement transaction?
Any proceeds from a life settlement may be used for any reason with no restrictions on its use. One can use it for long term care, purchasing other life insurance, other types of investments, personal use, medical use, gift to family members or for anything else one wishes to use it.
What are the tax implications of a life settlement?
There may be some tax implications of selling your life insurance policy as a life settlement.
If the amount you receive is less than the total premiums that you have paid during the life of the policy, you will receive the entire amount tax free.
If the total amount you have received is more than your total premiums that you have paid during the life of your policy then you will receive the total amount of premiums that you have paid back tax free and will be taxed on the excess.
If your cash value inside the policy is less than the total premiums paid then you will receive the total premiums paid back tax free and you will be required to pay capital gains tax on the excess money received.
If your cash value inside your policy exceeds the total premiums paid, then you will receive the total premiums paid back tax free, you will still be required to pay ordinary income tax on the difference between your premiums paid and the cash value, and the excess will be taxed as capital gains.
For detailed information on how this effects your personal tax status, please contact us for more information and of course you will need to consult with your personal tax advisor.
Are life settlements regulated by any state or federal agency?
Yes! Life settlements are regulated by most states including Florida.
Are there any concerns that one should have about selling their life insurance policy (drawbacks)?
There are several concerns when one sells a life insurance policy as a life settlement...
One's beneficiaries would no longer be entitled to the death benefit at the death of the insured.
Proceeds from the sale is no longer creditor proof (should that be a concern)
There are possible tax implications (see your tax advisor for more information)
What happens if someone changes their mind?
In most states, including Florida, one has up to 15 days after the receipt of the payment to change ones mind and rescind the offer.