Life Settlements
Let’s Talk About Life Settlements
What are the reasons for selling a life insurance policy?
The life insurance policy is no longer needed or wanted
The premium payments have become unaffordable
The owner is considering a surrender of the policy
The policy is about to lapse
There is a change in financial circumstances or a redeployment of assets
There is a change in life circumstances (such as divorce or death)
How does the life settlement process work?
Although a life settlement shares some common factors with a life insurance transaction, it does involve some substantially different issues. Capitas Financial has the knowledge and expertise necessary to assist policy owners in navigating the life settlement process.
There are numerous institutions in the marketplace today that will purchase life insurance policies. Capitas Financial will support policy owners with the life settlement process by assisting in the completion of the proper documentation and underwriting, as well as obtaining the most competitive bids for the policy. Effectively, Capitas will make life settlement companies compete to purchase the policy and achieve an offer that substantially exceeds the policy’s cash surrender value.
Because you will be required to provide personal information in a life settlement transaction, Capitas will also work to ensure that the companies you deal with have procedures in place to protect the confidentiality of your personal information.
What is the Policy Worth?
The amount received in the life settlement transaction will depend upon a number of factors, for example, the age and medical condition of the insured, the type of life insurance policy (e.g., universal life, whole life, term), the amount of the death benefit, the rating of the issuing insurance company, the amount of premium necessary to keep the policy in-force, and the amount of compensation the life settlement broker receives.
What are the alternatives to entering into a life settlement?
Borrow against the cash value of the life insurance policy
Cash-out the policy based on the available cash surrender value
Check with the life insurance company to find out if the policy can be converted to a paid-up policy or if the death benefit can be reduced to lower the premium payments
Use the life insurance policy as collateral to secure a loan
What else should I know in considering a life settlement?
Typically, there are no requirements for disclosure, but a policy owner should consider the following before proceeding:
The potential tax implications of a life settlement
The benefits of keeping the original policy
The receipt of life settlement proceeds may affect eligibility for public assistance programs
The insured may be contacted periodically by the life settlement company for information about the insured’s current health status
Agents involved in these transactions may not be required to be licensed or trained
Life settlements overall benefits for the policy owners
Provide funds for new, more cost-effective life insurance
Provide cash gifts to family members
Provide funds for charitable giving or to establish a charitable remainder trust
Remove a policy from an estate due to a reduction in size or projected tax liability
Receive considerably more money than the surrender cash value of the policy
Additional Resources
