Let’s be honest; no one can predict the future. Over time people’s lives and their needs change. Sometimes life throws unexpected curve-balls and life insurance premiums become too expensive, or coverage is no longer needed. A Life Settlement may be worth it if your needs have changed since the time of purchase.
Is a Life Settlement right for you?
What Is A Life Settlement?
A Life Settlement is the transfer of ownership & beneficiary (sale) of an existing life insurance policy to a third party (Qualified Investor).
The settlement purchase price must be higher than the policy’s Cash Surrender Value (CSV), but less than the death benefit.
Life Settlements are similar to Viatical Settlements, except a Viatical Settlement accomplishes the sale of an existing life insurance policy where the insured is terminally or chronically ill with less than a two (2) year life expectancy.
Is A Settlement For You?
Do You Qualify?
Determining if you’re eligible for a life settlement is based on all of the considering:
Insured Age
Policy Type
Insured Health
Policy Premium & (CSV)
Insurance Carrier
Policy Face Amount
Typical qualification guidelines are insureds over age 65, with some medical impairments, with a low premium-to-face & not a significant amount of CSV (in these cases it can be best to surrender the policy). These guidelines are not absolute, the best way to determine if you qualify for a life settlement is to work with a licensed life settlement broker to assist you through the process of evaluating all the variables. This process is free, and a helpful settlement professional is standing by.
How Much To Expect
When weighing the option of Life Settlement, a significant consideration is how much you can receive for the sale of your life insurance policy. The amount you may be able to sell your life insurance for depends on how well you qualify and urgency. A rule of thumb is, the more information gathered, the higher the potential offer. This means with more medical records, illustrations & annual statements to review the more accurately eligibility can be determined and offers made accordingly.
In situations where time is of the essence (for example the term conversion deadline is one month away) sometimes not all medical records can be retrieved in time. This can result in fewer buyers being able to offer and potentially a lower offer than if there was more time to gather underwriting information. If a life settlement might make sense for you, there is no reason to delay. Find out how much you can expect and make the best decision.
Working with a licensed life settlement broker will ensure underwriting items are gathered & presented to buyers as quickly as possible. Remember, a broker will only make money if a policy is sold, they will take care of all the headaches and hurdles of presenting your life insurance policy for FREE.
How The Life Settlement Process Works
1. Underwriting
Your broker gathers items required to underwrite and price your policy during this step. These things include medical records, carrier illustrations & life expectancy reports.
- Medical records can take anywhere from 1 day to sometimes over one month to receive depending on the doctor’s office. For the fastest underwriting time, it can be advantageous to retrieve medical records from your doctors in person.
- Life expectancy reports require all medical records to be received before requesting. The actual LE report can take anywhere from a week to over a month
- In-force (or term conversion) carrier illustrations must be ordered directly from the insurance carrier. Some insurance carriers can pose challenges providing the necessary illustrations. Do not be surprised or frustrated with your broker if several three-way calls with the insurance carrier may be required to produce the correct illustrations.
2. Offers & Negotiation
Once the required underwriting items are received, they are bundled and sent through to buyers to evaluate, price & make offers. As buyers complete their pricing, bids are submitted to the broker. An offer is not guaranteed, and some buyers take a longer time to price and make bids. Offers can be cash only, retained death benefit (RDB) only, or a mix of the two. A RDB offer allows the seller to designate a beneficiary to receive the offered RDB amount when the policy settles. Understanding & optimizing cash, RDB or cash plus RDB offers is not always easy. Working with your broker, with knowledge of historical pricing, is the best way to ensure you receive the most from the sale of your life insurance.
3. The Closing
If the policy owner accepts an offer, the closing step begins. Depending on the state the policy owner lives in the regulatory requirements of that state will be verified by the settlement broker and followed.
- Contracts need to be signed and notarized by the policy owner, insured, beneficiary & spouse (if applicable).
- Carrier ownership & beneficiary change forms also need to be signed by the policy owner.
- Once signed contracts are returned, the buyer must escrow the purchase price before they are given the carrier change forms to countersign.
- With escrow received, the fully executed change forms are submitted to the insurance carrier to be processed.
- Depending on the carrier, the change forms are completed within a specific time-frame.
- Once ownership & beneficiary change confirmations, showing the buyer as owner & beneficiary, have been received, the escrow is released, and the purchase price is paid.
The length of time each step takes varies, and it is essential to be prepared for delays. If time is an issue, and a rush offer is needed, let your broker know. Certain buyers will make quicker offers, although these are typically not as high of offers because the buyers are assuming more risk because of limited underwriting information.
An Important Life Decision
Being informed and working with the right life settlement company is one of the most important decisions when deciding to sell your life insurance. There has never been a better time to pursue a life settlement. Start the process today with one of the leading life settlement companies in the industry to find out how much value your policy really holds.
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