You’ve recently heard about the life settlement option and you’re wondering if it’s right for you. Perhaps your insurance agent or financial planner discussed it with you as a sensible way to rid yourself of an underperforming or unneeded life insurance policy. Maybe you have a pressing need for liquidity in your finances. No matter the reason you might be considering a life settlement, there are a few key points seniors should keep in mind when deciding if it’s the right option for you.
First, a definition: a life insurance settlement is the sale of an active life insurance policy to a third party for a cash payment that is more than the policy’s cash surrender value, but less than its net death benefit. The senior receives a cash payment while the purchaser continues to make the policy payments and receives the face value of the policy when the insured dies. Life settlement brokers bring together seniors who want to sell their policies and funding sources who want to purchase their policies, providing full transparency throughout the process.
It’s important to know that not all life insurance policies are eligible for a life settlement. To be attractive to funding sources, policies must be large enough to warrant the upfront expenses the investor will incur for the necessary due diligence and brokerage costs. Typically the face value needs to be at least $200,000 and the policy must have been in force for two years or more. Also, the policy type matters. Universal life, whole life and convertible term policies are generally the most attractive to funders. Another important factor is the life expectancy of the insured. Generally, investor are looking to purchase policies where the insured has a life expectancy of 12 years or less.
Seniors should also remember to take into consideration the broker’s experience and reputation if they want to receive the best possible price for their unwanted policy. Questions that need to be asked are:
1. How long has the brokerage firm been in business?
2. Is the firm in good standing with the insurance regulatory body in their state?
3. Is the firm registered with and a participating member of the Life Insurance Settlement Association, www.lisa.org?
4. Does the firm abide by the industry guidelines for transparency?
5. Can the firm provide examples of recent life settlement offers made to their clients?
Remember that your state may have safeguards in place, including disclosure or a period of time during which you may rescind after an agreement. Don’t be pressured into making a quick decision and be sure to verify all claims made to you by a prospective broker. Work with your financial advisor or attorney to determine if a life settlement will work for your particular situation.
Advanced Settlements in Orlando, Florida, is one of the pioneers of the life settlement industry and has been helping seniors unlock the cash value of their unwanted life insurance policies for more than 10 years. Log onto the company’s web site and use the “Quick Quote” tool to see if your life insurance policy qualifies for a life settlement.