WHAT IS A LIFE SETTLEMENT?
A
life settlement is the sale of an existing life insurance policy by the policy owner for an amount exceeding the current cash
surrender value. The settlement amount is determined by the investor/provider
firm considering factors such as the insurance policy conditions, age, and health of the insured. A lump-sum cash settlement is paid to an insurance policyholder in exchange for contract ownership rights.
The purchaser becomes the new policy owner and pays all future premiums due.
WHO IS A CANDIDATE FOR A LIFE SETTLEMENT?
Senior
clients 65 or older. The program works best for men 70 and older, and women 77
and older who have experienced changes in their health condition since the policy was issued.
WHAT TYPE OF LIFE INSURANCE POLICY QUALIFIES FOR A LIFE SETTLEMENT?
The
life insurance policy must be transferable and beyond the contestability period. Other
policy requirements include:
-
face amount of $200,000 or more
-
universal life, variable universal life, second-to-die,
or convertible term policies
-
issued by an A-rated carrier
WHY SHOULD A PERSON SELL A LIFE INSURANCE POLICY?
Often
senior clients have outlived beneficiaries, the premiums are no longer affordable, or the estate’s size or requirements
have changed. For some, an underperforming policy can be sold and replaced with a more economic one. The proceeds
of the sale are unrestricted and can be used by the seller for any purpose. Sellers use the transaction and proceeds
to reach a variety of financial and estate planning objectives including:
-
purchasing annuities,
replacement life insurance, or other financial products
-
making gifts or funding charitable bequests
-
removing insurance from an estate
that is no longer needed
-
funding long-term care insurance
-
liquidating and capitalizing unnecessary
business-related insurance
-
funding medical expenses
