Life Settlement

What is a Life Settlement? A Life Settlement is an agreement between two parties to sell one's Life Insurance for a lump sum of money. The two parties included in the transaction are typically the owner & insured of said Life Insurance policy and the buyer of the policy. The buyer can be any number of different entities. Typically the buyer is a Life Settlement Company. The buyer will have the seller go through what's called  Life Expectancy Underwriting which differs from traditional underwriting to acquire a life insurance policy. Once underwriting is complete the buyer makes an offer to purchase the policy. The offer must be more than the surrender value and less than the current death benefit in order to qualify. If the seller takes the offer all rights of the policy including Non-forfeiture and ownership goes to the buyer in exchange for the lump sum of money the seller receives. The buyer then becomes responsible for paying all premiums for the policy as well as becomes the sole beneficiary of the policies death benefit. The seller can choose to sell all or a portion of the death benefit of their policy. 

Who is a good candidate for a Life Settlement? A Life Settlement is for individuals who have Life Insurance policies that they are looking to sell for a number of different reasons. The two most common reasons for a Life Settlement to takes place are listed below.

  • When someone no longer has the need for the coverage and wants more money than the surrendering of the policy will give them.

  • If someone runs into financial hardships and can longer pay their premium and once again wants more than the surrendering of the policy will provide them. This could apply to many different life situations the most common being of which the seller is in bad health and needs money to pay medical bills and other expenses. 

What are some of the things I should consider before doing a Life Settlement? The most important things to consider before doing a Life Settlement are the people that will be affected and the reasons on why you're contemplating the option in the first place. A lot of Life Insurance policies have a rider attached to them that many people don't know about. It's usually attached to the policy by default (meaning the agent that sold you the policy doesn't necessarily have to select it or check a box to put it on the policy) it's called the Accelerated Death Benefit Rider or (ADBR). This rider lets the insured access up to 90% to 97% of death benefit before they die (results will vary you must check your policy for the rider and the specifics that apply to your individual Life Insurance contract) for the sole purpose of helping to pay medical bills and other expenses. In order for the rider to be accessed an M.D. must diagnose you with a terminal condition. A terminal condition is typically classified as a condition to where the patient has 12 months or less to live. This is one of the most common reasons why not to do a Life Settlement. However, everyone's situation is different and it is strongly recommended that you go over your finances and consult an estate attorney before entering into any agreement that may impact you or your families well being. 

If you would like more information on Life Settlements or a policy review to see if a settlement would be right for you. Fill out the contact form below and submit.