Life Settlement

A life settlement refers to the sale of an unwanted, unneeded, or unaffordable life insurance policy by the owner for a price greater than the cash surrender value of the policy but less than the death benefit. The seller no longer pays premiums and the investor, or purchaser, receives policy proceeds upon death of the insured.

Life settlements are among the least understood of the remediation options available to policy owners, but are a necessary consideration for problematic policies. Unfortunately many insured clients and fiduciaries fail to capitalize on the life settlement option and simply let policies lapse or be surrendered while missing the opportunity to maximize the value of the assets.

Who Qualifies for a Life Settlement?

Anna gets over a half million dollars for her client

Why Consider a Life Settlement?

Prevent a Policy Surrender or Lapse

Prior to letting a policy lapse or surrendering a policy back to the insurance company for the cash surrender value, a life settlement can provide a lump sum cash payment equal to the fair market value of your life insurance policy.

Premium Payments Have Become Unaffordable

Once a life settlement transaction is completed, the seller no longer pays premiums and the investor, or purchaser, takes over making the payments and receives policy proceeds upon death of the insured.

Coverage is No Longer Needed or Wanted

The original purpose for owning a life insurance policy may no longer be applicable today. Should a life insurance policy no longer be needed or wanted, a life settlement is a valuable tool to get cash for your policy and recoup premium dollars paid into the policy.

A More Suitable Financial Investment is Desired

Suitability to own a life insurance policy can change over time. Life insurance is a unique asset that requires funding to maintain the coverage. If the policy owner would rather use their cash for other investments versus paying premiums, a life settlement may be a great financial decision to put their cash to work in other assets that don't require funding to keep the policy in force.

Changes in Estate Tax Laws

With the new federal estate tax exemption amounts up to $5.45 million for an individual ($10.9 million for a couple), the financial protection to pay estate taxes may no longer be necessary. Selling your life insurance may be an excellent option for individuals who no longer need to worry about paying federal estate taxes.

The Life Settlement Process

The life settlement process can take up to four months from the time the completed application is received to receipt of payment. EnTrust Settlements keeps you updated throughout the entire process.

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Anna gets over a half million dollars for her client

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What exactly is a “life settlement”?

A life settlement refers to the sale of an unwanted, unneeded, or unaffordable life insurance policy by a senior, typically over the age of 70, to an licensed purchaser for a price greater than the cash surrender value of the policy.  The purchaser is responsible for making any future premium payments and receives the full death benefit upon the death of the insured.

What are some of the reasons why I might consider the sale of my policy?

Some of the reasons why you might consider selling your life insurance policy include:

  • Premium payments have become unaffordable
  • Coverage is no longer needed
  • Beneficiaries no longer need the financial protection
  • Policy surrender or lapse is being considered
  • Cash is needed to pay emergency expenses
  • Another more suitable financial investment is desired
  • Changes in estate tax laws
Do I qualify for a life settlement?

Purchasing parameters vary by Provider, but typical candidates are:

  • Insured(s) age 70 and older
  • Policy face value of $100,000 or more
  • Policy is more than two years old
  • Little or no cash surrender value available
  • Life expectancy of 15 years or less
  • All types of life insurance policies may qualify
How much money will I get if I sell my life insurance policy?

There are many factors that will determine the amount of an offer including, but not limited to:

  • The age and medical condition of the insured
  • Type of life insurance policy (e.g., universal life, whole life, term)
  • Amount of the death benefit
  • Amount of premiums necessary to keep the policy in force
  • Rating of the issuing insurance company
  • General market supply and demand
Are there any fees or costs involved in a life settlement?

Yes.  The costs associated with the sale of a policy are included in the purchase offer.  A fee is paid to EnTrust Settlements for consultation, the cost obtaining medical records, life expectancy reports, negotiating multiple offers from qualified providers, appropriate licensing, among other requirements.  If a policy does not settle or if EnTrust determines a life settlement is not feasible, no costs will be incurred.  Other costs can include trustee, legal, accounting, and consulting fees.

How long does the process take?

Most life settlement transactions take around 3 to 4 months to complete from the time the decision is made to receipt of payment.

Who is purchasing my policy?

Life settlement Providers serve as the purchaser in a life settlement transaction, on behalf of the funder.  Providers must meet licensing requirements in the state where the policy owner resides in order to purchase a policy in that state.  A funder is an institutional investor, lender, accredited investor or special purpose entity that purchases a life insurance policy through a life settlement Provider.  Funders are usually large institutions such as hedge funds, investment banks, insurance companies, and registered funds that buy life settlements as an investment.

What happens to the policy after I sell it?

The purchaser becomes the owner and the beneficiary of the policy, is responsible for making any future premium payments, and receives the full death benefit upon the death of the insured.   You have no obligations to the policy, but the insured may be required to periodically provide the purchaser with information which may include current health status.

Are life settlements regulated?

Life settlements are regulated at the state and federal level; however, there is no uniform regulation in place at this point and not all states are regulated.  Today, at least 42 states and the territory of Puerto Rico have regulations in place, with legislation pending in additional states.  If a life settlement involves the sale of a variable life insurance policy, the sale is regulated by the SEC and FINRA.

Are the proceeds of a life settlement taxable?

The taxation for a life settlement transaction can be complicated.  EnTrust strongly recommends that a policy owner seek professional tax advice prior to accepting any offers.

Is a medical exam required?

No, a medical exam is not required.  However, you will be asked numerous questions about your health status and will be required to sign a release for medical records.

What happens if I change my mind or if the insured dies shortly after I sell my policy?

Most states have a rescission period in which you can change your mind.  This will vary by state, but a typical rescission period is before the earlier of 30 calendar days after the date upon which the life settlement contract is executed by all parties or 15 calendar days after the receipt of the life settlement proceeds by the seller.

If the seller dies within this rescission period, the life settlement contract will be cancelled.  The Provider will owe the seller or the seller’s beneficiaries any proceeds it receives from the policy, subject to repayment of all life settlement proceeds and any premiums, loans, and loan interest being made to the Provider within the rescission period.

Contact Us to Find Out if your Policy Qualifies

A life settlement is a valuable financial option for policy owners who no longer want, need, or can afford their life insurance policy. Instead of lapsing or surrendering a policy back to the insurance company, qualified policies can be sold in the secondary market for a price great than the cash surrender value but less than the death benefit.

Contact us to determine if the life settlement option makes sense for you.