For more than 100 years, Americans had an established legal right to sell a life insurance policy. The courts have consistently held that a life insurance policy is considered your personal property and, as such, your have the right to sell your policy just like any other asset you own. California established this ruling in the 1980's and have modified it for the better of the policy owner ever since.
This is a valuable option for seniors to be aware of, that is; if you have a policy that you can no longer afford, or want, or is lapsing, or poorly performing, you have the right to pass it on to a third party (Sell it) and obtain a cash benefit. this may gain a you several times more than the cash values of its surrender to the insurance company.
When you sell your policy, as the owner you receive cash and the purchaser assumes all future premiums and receives the death benefit. In 1911, the U.S. Supreme Court issued a decision in Grigsby v. Russell, which recognized the rights of the life insurance policy owners to transfer ownership of their life insurance policies to a third party, since then... Americans have been able to do this. Now, 42 states license Brokers, and Providers, to offer the public this great alternative.
The difference between a Broker and provider is explained below.
IT IS VERY IMPORTANT TO KNOW, THAT SELLING YOU POLICY IS THE LAST CONSIDERATION, ALL OTHER OPTIONS SHOULD BE EXAMINED FIRST. You may have options or Riders inside your policy that can solve your financial situation, any preservation of your death benefit should be considered. Also, that you policy does not have to entirely be sold you can sell a portion and keep some for any final expenses, or anything else you may need, or plan to give to your beneficiaries. As Brokers we can assist with thes questions.
What is a Settlement ?
In a Life Settlement, a policy owner receives a cash payment for the purchase of their life policy, the new owner assumes all future premium payments, and receives the death benefit. the Cash payment usually is much more than the cash value of surrendering the policy, in many cases four to Eight times more, according to the US Government Accountability Office (GAO) 2010. This is a great alternative to letting a policy lapse, or surrendering it for the small cash value. The proceeds from the sale to you, are unrestricted, you can do what ever you wish with it.... ANYTHING!
Business opportunity Purchase
Pay Medical bills
Provide Education needs
Fund Long Term Care
Vacations, new vehicles
Paying down Mortgages
Etc...Anything you wish.
What kind of Life Policies can be settled ?
Almost any kind..Universal Life, Whole Life, Term Life, Second to die, First to die, Group (If it is convertable) Variable Universal, ETC. You can sell a portion of your policy.
What are the qualifications?
Basically if you are 62 or older, have a $75,000 or more life policy and own it more than 2 years. If you have health issues it does make for a better negotiated settlement. It is important to know that all beneficiaries understand and agree to the sale and are involved in the process. This is why a Broker is so important. A broker can answer all your, and your beneficiaries' questions directly.
Why I need a Broker?
The difference between a Broker and a Provider is:
Life Settlement Brokers...Connect the seller of an Insurance policy with dozens of buyers.
The Broker negotiates for the highes bid for the policy.
The Broker has a Fiduciary duty to the policy owner.
A Broker will work very hard to get the highest settlement for the owner. and has much more flexibility to do so. A broker will meet with you personally, and discuss all the rules and details so you clearly understand the process. Disclosure and transparency are very important.
Life Settlement Providers ...(Investment Groups) specialize in purchasing your policy as a buyer in the settlement market. You will most likely receive one bid and it will be lower than with a broker.... they only finance the purchase. Your chances of a much higher sale, is with a broker. Providers work directly with institutional investors, and generally will make you one offer on their behalf. A Broker will get many Providers to work for the sale, and negotiate to increase their bids. A Broker will get the financial bar raised for you. Remember Providers do not have a fiduciary duty to the seller, they represent the best interest of the institutional investors. A Broker represents YOU.
How Long does the Process take?
Anywhere from a few weeks to a few months, depending on a few variables...IE: Your medical records must be reviewed, the Life policy contract must be reviewed. And... the most important, is that your Broker is negotiating with many Providers, to get you the highest bid, and getting them to bid against each other so you pay out is the highest they could find. In many cases this can take up to 3 months.
It Feels odd, that a stranger would benefit from my death.
We understand but, don't feel odd. let me explain...As a Life Insurance Agent for about 3 decades, now a Broker, I have a clear understanding of the feelings of my clients, so this should help...
Life settlements are not much different than other established retirement vehicles, such as pensions and annuities. With each of these assets, you receive a specific payment that is based on calculations from insurance Actuary underwriters, that take into account how long other individuals in their pools are expected to live. If you should happen to pass away sooner than projected, the other workers in your pension fund benefit financially from your death. Social Security works pretty much the same way.
Life Settlements work simularly to other assets that are based on life expectance, and is very unlikely that you will be selling your life insuance policy to another person. Most settlements, have no mysterious stranger making the transaction for himslef. It usually a large corporation, a bank, or major stock portfolio group. (sometimes called Blind Pools) and they are not focused on idividual policies. They are placed in a pool of many policies, in an account.
The identities of the insured are protected by privacy laws, and life settlement Brokers and Providers, have tight proceedures to keep the insured information confidential. When your policy is sold to a third party your identiy is virtually unknown to the institutional owners. It is a business transaction only. Don't feel strange. Think about it...it is better than losing it all anyhow. Getting the most return on your owned policy is good business. Hope this helps.
How Much could I get.
Every case is different, the death benefit, age, medical condition, cash values, riders, options, Policy type, amount of premiums they must pay until insured passes away, ETC. This makes it very hard to say until all is reviewed. But...You will always recieve an amount much greater than the cash values of the policy. If we don't try we will never know. It does not cost to try, but... it can cost not to. Appraisels are FREE. Knowledge is Power