Did you know that you have an option to sell your life insurance policy
much like your home, stocks and other assets? Large and sophisticated
institutional funds were created to fulfill the need. Investment firms
that formed these funds saw this as an opportunity to create a new
portfolio of assets (the policies) with a predictable return on their
investment.
Life
settlements are one of the fastest growing areas in the financial
industry and life insurance policies have become a real asset to
seniors over the age of 65 who no longer want or need their coverage. A
life settlement (also known as a senior settlement) is the sale of an
existing life insurance policy to an investor.
The life
settlement market did not emerge until the late 1990's and is based on
the proposition that some individuals no longer want, need or can
afford their coverage. Instead of allowing the policy to lapse you now
have the option to sell your policy for 2 or 3 times the cash value.
Unlock this hidden asset as you learn more about this ever growing
market.
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Frequently Asked Questions
Q: What is a Life Settlement?
A:
Life insurance is an "assignable asset." Just like your home or other
assets, it can be given away, transferred to new ownership, or sold to
anyone the policyholder chooses. A Life Settlement is the sale of a
life insurance policy to a third party. The owner of a life insurance
policy sells the policy for cash payment but for an amount that is
often three-times higher than the cash surrender value. The buyer
becomes the new owner and/or beneficiary of the policy, pays all future
premiums and collects the full amount of the death benefit when the
insured dies.
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Q: What types of insurance policies can be sold?
A: Most
types of the life insurance policies can qualify; however, the most
common are Universal Life, Whole Life, and Convertible Term Life.
Q: After I sell my policy, are there any restrictions on how I can use the money?
A: No, there are no restrictions on the use of the funds – the money is yours to spend as you like.
Q: What are some of the reasons why I might consider the sale of my policy?
A:
- The policy is no longer needed or wanted
- To pay healthcare costs
- Premium payments have become unaffordable
- Considering lapse or surrender of the policy
- Change in the estate planning needs
- Additional cash flow
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Q: Are the proceeds of life settlement taxable?
A: The proceeds are tax-free up to the amount you have paid in premiums during the life of the policy. Whether or not and how the balance of the proceeds will be taxed depends on your specific situation. Please consult your tax advisor for additional information.
Q: How large does the policy need to be?
A: Generally $100,000 to $20,000,000.
Q: Will the premium be due after the policy is sold?
A: No, once the policy is sold, the client will have no future premium obligation whatsoever.
Q: What is the process of a life settlement?
A: The first step in the process is to fill out a HIPAA application, the application allows for the release of your medical records, in addition we will have you sign a policy information release form which allows us to pull an illustration of your existing life insurance policy. Once we have this information we are able to begin negotiations with Life Settlement providers on the sale of your policy.
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