WHAT ARE LIFE SETTLEMENTS?
WHAT IS A LIFE SETTLEMENT?
A life settlement or viatical settlement involves the sale of a life insurance policy for more than the policy’s cash value and less than its face value. It is always greater than what the issuing life insurance company will pay for the surrender of the policy.
In addition to age, expected life expectancy, and policy characteristics – including premium costs – other factors determine the final amount disbursed to the policyholder. For many, life insurance settlements can convert an unneeded policy into an asset with substantial value.
In a life settlement transaction, a seller transfers ownership of their policy to a buyer.
All aspects of ownership transfer, including the premium payments and death benefit, meaning that the original policyholder’s beneficiaries no longer receive anything upon the death of the insured.
- Costly monthly premiums will no longer be paid;
- Liquidation of assets for medical care or other expenses are required;
- The benefit itself becomes unwanted
The benefit of a life insurance policy to the loved ones you leave behind is quite a gift indeed, but if you no longer need this benefit or your circumstances would improve if you had access to those resources right now, then a life settlement will likely be an excellent fit.
In addition, you can also use the funds from a life settlement to give your investment portfolio a boost.
THE LIFE SETTLEMENT PROCESS
To see if you qualify for a life settlement, simply click qualify to answer a few questions. you will need to complete an application and provide necessary documentation, including a medical form.
The buyer of your life insurance policy collects the finished documents. The life settlement process is simple and all information is kept confidential. The life settlement process consists of the steps described below
LIFE INSURANCE POLICY OWNERS
When is it time to consider a Life Settlement for you or a loved one?
Life settlements offer a new possibility for policyholders to sell an unwanted policy. The qualification process is carried out by our experts in-house and can be a huge benefit for you. You can also qualify by answering a few questions on our qualify form.
By selling an unwanted policy – or one that is no longer required – an individual receives the funds they need for paying bills, vacation, medical expenses, or even retirement. While an individual may sell their life insurance policy for a number of reasons, various circumstances may include the following:
- A policyholder paying expensive premiums for a policy they do not need or cannot afford to pay.
- The ability to use policy funds for charitable donations. Giving to charity allows you to see your donation in action throughout life and qualifies as a tax deduction.
- A policy owner’s need to pay for the costs associated with long-term care services.
- The insured outlived their beneficiaries and no longer have to pay on a policy.
Turn your Key Man Life Insurance policy into a salable asset
Many scenarios exist where a life settlement can help an individual turn life insurance into a salable asset that offers a profitable way to alleviate costly premiums or an unwanted policy.
OWNERSHIP CHANGES
WHEN A POLICY IS NO LONGER NEEDED
KEY MAN POLICY
BENEFITS OF A LIFE SETTLEMENT
Selling an unwanted life insurance policy can change your life, both financially and for the better. A Life Settlement, or the selling of your unlapsed Life Insurance Policy to a broker is a far better choice than allowing the policy to lapse or to surrender it due to the late or non existing monthly payments.
Seniors in particular, are looking for new ways to increase their stability regarding retirement portfolios, selling unwanted life policies is an excellent means to a positive financial outcome.
YOU CAN BENEFIT IN MANY WAYS FROM THE SALE OF AN UNWANTED POLICY |
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Rest assured with a heightened piece of mind, safe with the knowledge that with the additional funds obtained from the sale of the life insurance policy, much needed funds will supplement your retirement. |
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You can sustain a higher quality of living by receiving a considerable cash payout than the usual cash surrender value. |
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A Large lump sum can be obtained immediately |
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You will experience superior relief on all policy premium payments regarding an unneeded life insurance policy. |
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You will have the choice to redirect proceeds to generate income from other better performing assets if need be |
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Long term care can be funded by the selling of a life policy and the funds obtained by its sale. |
TIMELINE
THE LIFE SETTLEMENT INDUSTRY
TIMELINE
Grigsby v. Russell:
The U.S. Supreme Court ruled that life insurance policies are an asset. Like all assets, life insurance policies are now freely assignable for value.
1911
VIATICAL SETTLEMENTS
The AIDS epidemic left many terminally ill patients in need of money for treatment. The secondary market for life insurance policy, known as viatical settlement, helped thousands of patients by purchasing their life insurance policies and providing them with much needed cash.
1980'STHE NAIC
National Association of Insurance Commissioners’ (“NAIC”) Living Benefits Model Act adopted. The Act was the precursor to today’s life settlements acts.
1993THE VAA
The Viatical Association of America (VAA) is founded as a non‐profit trade group for the viatical industry.
1994THE NAIC MODEL
NAIC Model act Amended extensively..
1998SELLING UNNEEDED POLICYS
Seniors in America discovered a new option to sell unneeded or unwanted life insurance policies. Consumers over the age of 65 are now able to sell their unneeded life insurance policy as an alternative to lapse or cash surrender.
Late-1990sTHE LIFE SETTLEMENTS MODEL ACT
The National Conference of Insurance Legislators (NCOIL) adopted the Life Settlements Model Act. The VAA changed its name to the Viatical and Life Settlement Association of America (VLSAA).
2000'LIFE SETTLEMENTS' BECOME WIDELY KNOWN.
The purchase of life insurance policies from senior citizens became widely known as “life settlements”. The NAIC Model Act was, again, amended extensively. New sections were added to address fraud, advertising and civil remedies
2001LIFE SETTLEMENTS GROW TO STAGGERING HIGHS
The life settlement option had quickly grown to an estimated $5 Billion (face value of policy settled) industry. Life settlements were regulated in 25 states and provided seniors significantly more value than the cash surrender option.
2005INCREASED MARKET AWARENESS
New surveys were conducted that documented significant opportunity to increase financial market awareness of the life settlement option.
2006VIATICAL SETTLEMENTS MODEL ACT
Thirty‐five states had adopted the original NAIC model act. In June 2007, the NAIC passed a revision to the Viatical Settlements Model Act that addressed the burgeoning life settlement market.
2007INDUSTRY CONTINUES TO GROW
At an estimated $12 billion (face value), the industry continued to grow at a rapid pace, while sophisticated companies and institutional investors entered the marketplace.
2008INVESTOR CAPITAL
A decrease in the investor capital reduced the ability of life settlement funds to purchase new policies. Policyholders settled approximately $8 billion worth of U.S life insurance.
2009THE LIFE INSURANCE CONSUMERS DISCOLSURE MODEL ACT IS BORN
In November 2010, National Conference of Insurance Legislators (NCOIL) adopted its Life Insurance Consumers Disclosure Model Act. This Act mandated that insurers provide written notice to policyowners, if an insured is 60 or older or is known by the insurer to be terminally or chronically ill, and if a policy owner requests to surrender the policy, request an accelerated death benefit under the policy, or when an insurer sends notice to the owner that the policy may lapse, that there are options to lapse or surrender available to them.
2010CAPITAL MARKETS SHOW RENEWED INTEREST IN LIFE SETTLEMENTS
As the industry matured, capital markets renewed their interest in life settlements. The market saw a resurgence as investor interest returned and recognized the market as a transparent and highly regulated industry.
2011LIFE SETTLEMENTS SALES INCREASE
Life settlement sales increased in 2012 as compared to the prior year, but in general the asset class continued to struggle to attract new capital in 2012.
2012TOTAL LIFE SETTLEMENT TRANSACTION EXCEED $2.57B
The life settlements industry showed major signs of turnaround in 2013. Berkshire Hathaway, the publicly owned invest company founded by Warren Buffett, returned to the asset class for the first time since 2006 by purchasing a portfolio of $300 million (face value) in life insurance policies.
2013STEADY GROWTH
Life settlements continued to show signs of steady recovery from the downturn of 2009-2010. Transaction volumes were reported higher by market participants in all major segments of the industry
2014RECENT DAY
LIFE SETTLEMENT AND VIATICAL SETTLEMENT PROFESSIONALS
As life settlements rapidly gain recognition as a strong financial tool, potential clients look to their trusted professional advisor to provide them with solid projections to maximize their assets.
For clients with a life insurance policy about to lapse, or for those who have considered surrendering their policy, a life settlement may be an effective solution.
CPA's
In a special position, CPAs inform their customers about the advantages of life settlements. Crucial to understanding the significance of life settlements, CPAs should discover what it can offer elderly customers with options that fortify their monetary portfolio. In fact, life settlements can give you the answer for additional financial liquidity. The funds from a life settlement may spare individuals cash if they procured a policy three or more years ago..
TRUSTEES
For those trustees who manage a life insurance policy that fails to meet expectations or seems too confusing to handle, a life settlement paves the way to eliminating an unwanted policy. While reviewing your clients’ accounts, take into account the following recommendations to see if a life settlement is a feasible option:.
- Complete a thorough review of your client’s opportunity for a life settlement by looking into individual factors – age, wellbeing, policy costs, etc. – with an expert.
- Get several offers from life settlement experts together and move forward with the highest market value for the seller.
Rather than allowing a client’s policy to lapse or terminate due to high premiums, see if a life settlement would best suit their needs. We work with professionals of all backgrounds to help their customers maximize the market value of a life insurance policy.
