Frequently Asked Questions
Like the better-known Viatical Settlements, in which terminally ill people may sell their life insurance policies for cash, Life Settlements let you forgo a death benefit and use the cash in your policy while you're alive. Life Settlements, are for policy owners, usually seniors, who expect to live more than a couple of years. Life Settlement is a lump sum payment (for more than its cash surrender value but less than its death benefit) to the owner of a life insurance policy by a funding source, referred to as a Settlement Provider, in exchange for ownership of the policy. The Settlement Provider takes over the premium payments and carries the policy for the remainder of the insured's life. Specific rules for Life Settlements are re set by the state in which the policy is issued.
A Viatical Settlement is the policy sale in which the insured is terminally ill. Life Settlement is a lump sum payment (for more than its cash surrender value but less than its death benefit) to the owner of a life insurance policy by a Settlement Provider, in exchange for ownership of the policy regardless of health. Life Settlements are referred to as "Viatical Settlements" by statute in Montana and Oklahoma.
Cash value can also be referred to on the annual report from your carrier as "Accumulated Value," "Policy Value," or "Account Value." This is the additional amount over the cost of insurance that you've paid into your policy over time. Cash surrender value is calculated by subtracting from the policy's cash value any applicable surrender fees, which can be substantial.
Most types of life insurance policies can qualify, however, basically Universal, Variable Universal, Term, Convertible, Survivorship (any type), Whole Life and Key-Person.
If you have any questions, please don’t hesitate to contact SeniorLIFE™.
Under United States Supreme Court precedent stretching back almost a century, life insurance is considered your personal property — like any other tangible or intangible personal property — you can sell it, trade it, or give it away.
Life Settlements have been around as a way to tap a hidden asset for many years. Yet, most policyholders simply never knew this was an option for them.
Historically, most Life Settlements were transacted by the wealthy, on the advice of their personal financial planners. Life Settlements, however, generally are available to anyone over 65 who owns a life insurance policy. You don't have to have a million-dollar policy to be eligible to cash it in and it costs nothing to find out more.
Your life insurance policy is legally protected as your personal property, and you as the policyholder, have the guaranteed right to transfer ownership and receive compensation in return.
This right was guaranteed in 1911 (Grigbsy v. Russell) when the United States Supreme Court established the right of a policy owner to manage and sell his/her ownership interest in a life insurance policy without limitations — and at the highest possible value. In this landmark decision, Supreme Court Justice Oliver Wendell Holmes, one of the greatest legal and literary minds in our nation’s history guaranteed that all policy owners have the right to:
- Name their policy beneficiary
- Change the beneficiary designation
- Sell the policy to another party
- Assign the policy as collateral for a loan
- Borrow against the policy
Generally, anyone over age 65 who has $50,000 or more in life insurance coverage that is beyond the period of contestability may qualify for a Life Settlement through SeniorLIFE™ regardless of health condition. Other factors considered are the policy’s cash surrender values and the cost of premiums. A basic principle to remember is that the older the age of the insured and/or the more health complications that exist, the higher the settlement.
Contact SeniorLIFE™ to find out more.
If you are a senior, have outlived the original purpose of your life insurance policy and are considering surrendering it for cash value — or worse, letting the policy lapse — then you should consider cashing in a policy through SeniorLIFE™. Your reasons, while personal may include, among others:
- You want to finance a product that better suits your circumstance
- You would like to fund senior housing or long-term healthcare needs
- You are planning to surrender or lapse a policy
- Your insurance needs have changed
- Your policy is underperforming
- You have outlived your beneficiaries
- The premiums have become unaffordable
- Your are planning to retire
- Your health has changed since the policy was purchased
- Your advisor recommends new life insurance, annuity or long-term care coverage
- You wish to make a charitable contribution now as part of a 1035 Exchange
- You’ve experienced or made changes in your estate planning
- You are retiring as “key-man/woman” or are selling a company / partnership
- Divorce or Bankruptcy
- Corporate liquidation of policies for funding buy-sell agreements
SeniorLIFE™ is committed to providing the most comprehensive market access, a straightforward process and the greatest privacy in each case. Whether we work with a Financial Professional or directly with you, the Policyholder, you can expect that each step of the way, SeniorLIFE™ will communicate and inform, you, our client.
Each case is unique and timing will vary. In general, one can expect a Life Settlement process to take as little as one month to close once a file is complete for submission.
Yes. A cornerstone of SeniorLIFE™ is our pledge to confidentiality. We are committed to your privacy — we have put in place a unique double-blind document submission process that ensures absolute confidentiality of your information throughout the bidding process. SeniorLIFE™ does not sell, trade, or otherwise divulge private information (medical, financial, or other personal), unless we have your explicit written authorization.
Because individual policies, like yours, are bundled into portfolios by interested Institutional Settlement Providers, often there can be a material difference among the bids that your life insurance policy can receive. If you go to just one Provider, you won't know if you could have gotten more from someone else. Not only that, you would be working with an agent whose allegiance is with their employer, the Settlement Provider.
SeniorLIFE™ is a full-service, licensed Life Settlement Brokerage Company, whose motivations are aligned with yours — to unlock the maximum value for policies that no longer serve you. SeniorLIFE™ only deals with the major Institutional Settlement Providers in good standing in the marketplace and contacts them directly and through our Exchange membership to present your policy with complete anonymity through our proprietary double-blind document management system. Settlement Providers know that when they deal with SeniorLIFE™ they are participants in a competitive bidding environment which is a better way to ensure you receive the most for your policy.
SeniorLIFE™ works ONLY with Institutional Settlement Providers
in
good standing. These sophisticated investors view life policies they
buy as a way to diversify their portfolios with investments that
have returns uncorrelated to traditional investments. SeniorLIFE™
NEVER sells policies to individuals or small investors to fund policies.
Life Settlements are financial products. Like other products, Investors have different portfolio needs and each has unique life expectancy calculations — the biggest factor in determining the settlement offer — aside from the face value of the policy. To maximize the value for your policy, it's important to choose a qualified broker with access to and relationships with a large pool of investors, known as Institutional Settlement Providers. Most Life Settlement Providers buy exclusively through brokers, as they don't have in place the infrastructure to work directly with consumers.
The amounts offered by Life Settlement Providers (bids) will vary widely, based on what rate of return these investors require and their analysis of the life expectancy. In general, your policy will be evaluated on:
- Policy face amount
- Cash surrender value of the policy
- Premiums
- Age and Health of Insured(s)
- Type of policy
Settlement Providers that bid on your policy view it as an investment, and they want to maximize their return. They are not only paying you an upfront cash Settlement amount, but are also taking over the payment of the premiums for the rest of your life. So your health is a consideration in their calculation of a bid. As a rule of thumb, the older you are, the higher your Life Settlement amount will be. Because they are in competition with other Providers for your policy when they bid through SeniorLIFE™, Settlement Providers balance those factors with the prospects of providing a bid that is sufficiently high to win over other investors.
The value of a life insurance policy is determined by a number of factors, including but not limited to:
- Your age
- Your medical condition
- Type of insurance policy
- Face amount of policy
- Amount of premium payments required to keep the life insurance policy in force
Contact SeniorLIFE™ for FREE, confidential consult to see how much your policy may be worth.
The application process is free of charge. SeniorLIFE™ charges no fees to the policy holder upfront. After the policy has been underwritten by the Provider, an offer will be made. Providers make their offer based on a number of factors and costs associated with the transfer of the policy which will be specified in the offering documentation.
SeniorLIFE™ will disclose all of its fees and charges when the offers are presented to the policy holder. Any costs are paid at the time of closing escrow, a process similar to the purchase of a home.
In most cases, the Life Settlement process is similar to that which you undertook when you first bought your policy. Once you have completed the documentation giving us permission, SeniorLIFE™ will work directly and confidentially with your doctors to collect your medical history. Some Settlement Providers, particularly when bidding on a relatively large policy, will require a brief medical assessment to confirm or update your information. The medical exam is free of charge and is usually scheduled at your earliest convenience either via telephone interview or in person by a licensed medical technician, bound by HIPAA privacy laws, who comes to your home.
You will no longer be responsible for making premium payments on the policy. All rights and obligations of the policy are transferred to the new owner, the Settlement Provider, who may name a new beneficiary of the policy who will collect the proceeds upon the insured's passing.
The proceeds from the settlement of your policy are yours to spend as you like. Please, however, contact your trusted financial advisor before proceeding to ensure you understand any tax implications of this transaction.
SeniorLIFE™ is not a licensed tax consultant or financial planner and strongly recommends that you consult your trusted tax advisor BEFORE completing a Life Settlement to ensure your particular estate and tax considerations are addressed. Tax treatment differs between Term and Universal or Whole Life policies. Generally speaking and according to industry reports, Life Settlement proceeds are tax-free up to the cost basis (premiums paid since policy inception). Proceeds are taxed as ordinary income from basis to cash surrender value and proceeds above the cash surrender value are taxed as capital gains. These general rules can change with time and vary by state. Please consult your tax advisor regarding your specific situation, and for any applicable state tax advice.
Once you've completed your Life Settlement contract, and the ownership of the policy has been transferred, you will no longer have to worry about paying the premiums — that will be the responsibility of the new policy owner, the Settlement Provider.
Yes. You have 14 days after closing to change your mind. In some cases, however, the Life Settlement provider may charge you an administrative fee if you rescind the transaction after closing.
If you were to pass away in the first 15 to 30 days (the timeframe varies depending on your state of residence) after you receive proceeds from a Provider, the Settlement contract will automatically cancel. The Settlement Provider will pay the owner of your policy or the beneficiaries designated by the owner, an amount net of any money it already paid for the purchase of your policy and any premiums it paid to the insurance company to keep your policy current.
No. In many cases, a portion of your policy can be sold with the remaining death benefit left to the original beneficiary.
Most states regulate Life Settlement transactions. You can see which states are regulated with this Life Settlement Regulation Map.
We at SeniorLIFE™ are witnessing three trends in the life insurance industry — lower credited interest rates on cash value policies, lower guaranteed term insurance rates and greater due diligence by potential Settlement Providers — trends which already are significantly affecting the performance and position of existing policies. In addition, these trends are influencing the way people determine the type of policy that best meets their insurance needs. They are a function of the longer term trend that people are living longer than ever.
See also, "Hot Issues in Life Settlements".
Unlock the potential of your SeniorLIFE™
Getting more information and having your policy evaluated for Life Settlement is easy.
- For a free, no obligation consultation on the worth of you life insurance policy, fill out and submit our "What is your Policy Worth?" form.
- If you still have questions, please don't hesitate to contact us at SeniorLIFE™.