Frequently Asked Questions
What is a life settlement?
A life settlement is when a policyholder sells their policy for a lump sum cash payment. It can provide competitive offers for the real value of a policy.
Am I eligible for a life settlement?
The easiest way to determine this is to use our life settlement calculator, which takes into account your age/health, the policy type, and the policy size. Most people who sell their life insurance are 65+ years old or have a serious medical condition. The types range anywhere from universal to whole to convertible term policies. In regards to the size, the existing policy should have at least $100k worth of face value
What are the different kinds of policies?
Universal, whole, and convertible term policies are all great candidates for a life settlement. Universal is one of the most popular forms of cash value life insurance. It provides flexible premiums, death benefits, and a savings option. Whole is the oldest and most expensive form of cash value life insurance. The cash values generally grow at a low interest rate and pays the policyowner dividends on a periodic basis. Term is the simplest and cheapest type of coverage. It offers only a pure death benefit with no cash value buildup, reminds in force for a predetermined amount of time, and the insured pays monthly or annual premiums to the insurance company.
Why should I sell?
There are multiple reasons a person should consider selling their life policy. Just like any other policy, you may find that it no longer suits your needs. The premiums may no longer be affordable, you may no longer need the insurance or have a beneficiary, the term policy could be approaching expiration and you may need cash in the short term. Studies have shown that on average, policyowners who sell their policies can expect to receive more than four times the policy’s cash surrender value.
How is the value of my policy determined?
When calculating a payout amount, life settlement providers attempts to determine how much they will pay into the policy until they receive the death benefit. They want to make sure the investment is worth it. The most critical factors life settlement companies look at when determining the value of a policy are life expectancy, cost of keeping the policy in force (expected future premiums), and the face value amount of the policy (death benefit).
What will happen to my life insurance policy?
After the settlement transaction, the buyer pays all future premiums and receives the death benefit upon the death of the insured.
Will I have to pay a premium every month?
No, once you’ve purchased your life settlement, you no longer need to worry about premiums because it’s the investor’s responsibility now.
What if I only want to sell a portion of my policy?
This is very possible to do. You can sell part of your policy, eliminate costly premium payments and maintain a portion of your coverage.
Are life settlements legal?
Life insurance policies are fundamentally an asset with value, therefore they are legal to transfer ownership. They have become increasingly more relevant with the rise of life expectancy.
How much money do I have to pay upfront?
There are no upfront fees, credit score or income level requirements. There is also no obligation to accept a contingent offer.
What if I change my mind?
As a person selling your policy, you need to remember that you do not have to accept an offer, even if you shopped around for the best price. If you do accept and offer and later reconsider, be aware that some states have laws that allow you to change your mind within a certain amount of time.
What is a viatical settlement?
A viatical settlement has two types. The first is for an insured person who is terminally ill, which is defined as having a life expectancy of less than 24 hours. The other type is an insured person who is chronically ill, which is someone who can no longer perform two or more of the following activities; eating, using the toilet, bathing oneself, or dressing oneself.
What are some common myths and misconceptions associated with life settlement plans?
Some of the most common myths are life settlements are unregulated, scams, or only for the rich. Some other common ones are only permanent policies are eligible, you have to be sick to be eligible for a life settlement, and there is too much paperwork.
What are the truths in response to these myths?
Most states have state regulations regarding life settlements and over 90% of policyholders are protected by these. Each state has a department of insurance, and almost all of them regulate life settlements. Life settlements are highly regulated legal transactions. Think of it as this: you have an asset (a policy), a buyer wants to purchase that asset. While a majority of settlements are arranged on policies worth $100k or more, the lower limit is actually $50k face value. Even if your policy is worth less than normal, the amount you receive could still have a great impact on your financial situation. Term life policies can be sold if they are converted into whole or universal life policies. A traditional settlement has no sickness requirement. The paperwork issue has gotten a lot better in comparison to previous years. With recent technology and direct policy buyers, the process is much faster. The part that takes awhile is reviewing applications and documentation.