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Frequently Asked Questions
Answers to most common life settlement questions
BACK TO TOP Q: What are Life Settlements? A: A life settlement is the sale of an in-force life insurance policy to a third party. The owner of the life insurance policy is able to get cash for their policy (which is more than the cash surrender value and less than the face amount of the policy). The cash amount the insured receives is determined by the insured's life expectancy and the associated cost of premiums to keep the policy in force for that time period. This figure represents the present day value of the policy and consequently the monetary offer to the insured. The buyer in this transaction becomes the new owner and/or beneficiary of the life insurance policy, pays all future premiums and collects the entire death benefit when the insured dies. BACK TO TOP Q: Is the process confidential? A: Yes. All Life Settlement personnel and affiliates are guided by the highest standards of confidentiality. Therefore, no medical or financial information will be disclosed to any other person or entity not a part of the process without the seller and/or insured's specific written consent, unless required by law. BACK TO TOP Q: How long does it take to complete a life insurance settlement transaction from start to finish? A: Our goal is to complete most transactions within 30 days after receiving all documents. We need to carefully review and evaluate the insured's medical records. Sometimes obtaining these records may take some time to accomplish and can slow down the transaction process. BACK TO TOP Q: Are there any restrictions as to how the funds are to be used? A: Proceeds from a life settlement are not restricted in any way. BACK TO TOP Q: Are the proceeds from a life settlement taxable? A: The proceeds from a life settlement are generally tax free up to the amount of premiums paid for the policy. The difference between that amount and the cash surrender value is generally taxable as ordinary income. Amounts received in excess of cash surrender value are generally taxed as capital gain. Consult your tax and financial advisors before completing a transaction. BACK TO TOP Q: What if I change my mind? A: If you change your mind about selling your policy, you can cancel the life settlement contract at any time up to the 15th day (30 days in some states). BACK TO TOP Q: What if I die shortly after selling my policy? A: If you die at any time up to the 15th day (30 days in some states) after you receive the money from the provider, the settlement contract will automatically cancel. The provider will pay the owner of your policy or beneficiaries designated by the owner in the life settlement contract any proceeds it receives from your policy, minus 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. The insurance company or the provider should refund any unearned premiums paid. BACK TO TOP Q: Are there any medical exams or application costs? A: The life settlement application process is free to you (we will bear all the costs associated with processing your request for a sale quote) and no medical exam is required. BACK TO TOP Q: Does my state regulate Life Settlements? A: Life Settlements are regulated by most state insurance departments. Some states have enacted statutes addressing the sale of all life insurance policies. Other states have laws that only regulate the sale of life insurance policies insuring individuals with a life expectancy of less than 24 months. Still others do not regulate the transaction at all. Of those states that regulate the transaction, most require the broker and provider to be licensed. Submit your qualification form today and a representative will contact you regarding your policy value and answer any questions about your states laws. Most states allow life settlements. BACK TO TOP Q: How do I know if my life insurance policy will qualify? A: Most types of individual life insurance policies (and many group policies) qualify for a life settlement as long as they are at least $50,000 in face value and are at least two years old. We will work with virtually every policy type including term, whole, universal, variable, group or joint survivorship. Policies may be owned individually, or through corporations, foundations, trusts, non-profit organizations or businesses. In some states, under certain circumstances, a policy less than two years may qualify for settlement. BACK TO TOP Q: Does Life Settlement utilize any institutional funding? A: Our Life Settlement policy buyers and affiliates are backed by institutions such as banks, reinsurance companies, mutual funds and other financial companies. Each Provider has qualifications or parameters they factor when reviewing a policy. If the policy does not fall within their parameters, the policy is declined. If the policy falls within purchase parameters, an offer is presented to the client. BACK TO TOP Q: What is the difference between a Life Settlement and a Viatical Settlement? A: An insurance policy is considered a Viatical when the policyholder's life expectancy is 24 months or less and a Life Settlement is when the policyholder's life expectancy is 2 to 12 years. BACK TO TOP Q: Is it really legal to sell and buy someone else's Life Insurance policy? A: Yes, remember that once a life insurance policy is issued and put in force it is the property of the contract owner. Much like any other asset, the policy owner has the right to dispose of the policy in any manner that he or she may choose after the contestability period has passed. |
Your policy most likely qualifies—most policies do.
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