An alternative to the lapse or surrender of your life insurance policy.

A Life Settlement is the sale of an existing life insurance policy to a third party for more than its cash surrender value but less than its net death benefit. Such transactions are usually undertaken for the purposes of estate or financial planning. Life settlements can be a valuable source of liquidity for people who would otherwise surrender their policies or allow them to lapse—or for people whose life insurance needs have changed.

Many seniors today are discovering that life insurance policies that once seemed appropriate, are no longer needed or no longer meet their needs. Typically you have few options; either let the policy lapse, continue paying the premium to keep in force or surrender policy for its cash value.  Insurance companies do allow their customers to “surrender” their policies, which means the policyholder can receive the cash value that has built up, however, this may be a fraction of the face value if anything. There may be minimal if any cash value in older policies if they were not structured properly to begin with or simply were not designed to create cash value. 

Life settlements may be an option for people who may have thought that they had no options at all. Rather than continuing to pay premiums on a policy that no longer serves its original purpose, life settlements can offer payoffs that can be significantly greater than surrendering a policy. Life settlements may offer a reasonable and profitable exit strategy that addresses your financial objectives.

Changing priorities or dissatisfaction with their life insurance policies have caused some policyholders to discontinue their existing life insurance policies. While policy owners have a legally protected right to sell (or “assign”) a life insurance policy, few are familiar with this option. People are recognizing that life insurance is an asset within an estate or financial portfolio that should be managed for optimum performance.  

How Do Life Settlements Work?

The purchasers of life settlements, sometimes called life settlement companies or life settlement providers, generally are institutions that either hold the policies to maturity and collect the net death benefits or resell policies—or sell interests in multiple, bundled policies—to hedge funds or other investors. In exchange, you receive a lump sum payment. The amount you will receive in the secondary market depends on a range of factors, including your age, health and the terms and conditions of your policy—but it is generally more than the policy's cash surrender value and less than the net death benefit.

When you sell your life insurance policy, whoever buys it is acquiring a financial interest in your death. In addition to paying you a lump sum for your policy, the buyer agrees to pay any additional premiums that might be required to support the cost of the policy for as long as you live. In exchange, the buyer will receive the death benefit when you die.

Why Life Settlement?

Dissatisfaction or poor performance of existing policies
Changing needs and priorities – children have grown up and on their own, house paid off, funds put to better use toward other expenses, etc
Recognition that it’s an asset within your financial portfolio that should be managed for optimum outcome
Better financial alternatives and availability of superior policies making the old ones obsolete
Escalating policy premiums with some permanent policies and no or minimal cash value accumulation to show for it
Policyholder allowing policy to lapse are receiving nothing from years of premium payments
Escalating or large premiums have become a financial burden to elderly seniors
Changes in estate planning needs
Life insurance companies offer no viable alternatives

Why not life settlement? Factors to consider before selling your policy.

On-going life insurance needs. Are you eligible for coverage in a new policy and how much and at what cost
Less costly alternatives such as borrowing against your policy, reducing coverage or 1035 non-taxable exchange to a new policy
Eligibility for accelerated death benefits in existing policy for terminal illness if offered
You may have to pay taxes if the cash surrender value of your policy—or the amount of a life settlement—exceeds the premiums you've paid
Difficulty Determining Fair PricesOne of the hardest things to know when you are selling a life insurance policy is whether you are getting a fair price for your policy. The only way to know is by shopping your policy around
Impact on Your FinancesA cash payment from a life settlement can have unintended financial consequences; if you currently receive state or federal public assistance, such as Medicaid, a life settlement can negatively impact your ability to participate in that program. Consult with an attorney or accountant and make sure you fully understand all consequences. 
Impact on Your Survivors—Consider carefully your need for current income against the future financial needs of your survivors.
High transaction costs 

**Life Settlements are not for everyone. It's important to fully understand how life settlements work and alternatives available to life settlements to make sure it's the best alternative for you. We will review your existing policy and discuss all of your options so that you can make an informed decision. We only work with licensed life settlement companies in the sale of  your life insurance policy. 

Call us Today to review your options with out-dated life insurance policies

Have a Question? Call to review your options with outdated insurance policies 973-285-1040

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