Your life insurance policy should give you more freedom, not weigh you down. Life settlement services help seniors get more from their insurance policies by offering the option to sell.
A broker is an important part of this process. By representing and advocating for the seller, they balance the power dynamic between policyholder and buyer.
What Are Life Settlement Services?
Life settlement services facilitate the sale of an active life insurance policy to a third-party buyer. It’s a potential alternative to surrendering your policy, which you can do with a policy that has built-up cash value. You ask the life insurance company to cancel your coverage, and the company remits any built-up cash value.
When you settle, you offer your policy for sale to a buyer, also known as a provider or a life settlement company. Buyers bid on the policy, and you choose which offer to accept. The buyer pays you for the policy, and you walk away with the proceeds minus any fees.
Because a settlement is a sale, not a surrender, the payout is higher. The option is available for qualifying policy types with a minimum face value of $100,000, depending on policy terms.
The Distinction Between a Broker and a Provider
Like most high-value transactions, a life settlement involves several parties. The provider is the life settlement company or individual investor that purchases the policy for an agreed-upon price. A policyholder may work directly with a provider, but there is risk involved.
The life settlement process is a negotiation. Individual and institutional buyers are experts in evaluating policy value, and their goal is to maximize profit from the sale. Your policy may be worth more than they offer.
Working with a life settlement broker puts you on even footing. Settlement brokers work for you, the seller, as your advocate throughout the process. They take care of negotiation and logistics for you, handling tasks such as:
- Gathering paperwork, such as medical records and life expectancy reports
- Policy valuation, so potential buyers understand its fair market worth
- Shopping the policy to multiple providers, then answering questions and responding to offers
- Facilitating negotiations, including communicating competing offers to maximize payout
- Handling communications, including sending documents and updating the policyholder on the sale’s progress
As the policyholder, you are free to choose a life settlement broker or provider. A broker will handle finding a provider on your behalf, and their job is to find a provider that best suits your needs.
Consider focusing your energy on finding the most trusted life settlement services for seniors. The experienced brokers at Life Settlement Advisors are here to help.
Qualifications for Professional Life Settlement Services
Any policyholder who qualifies for a life settlement can work with a professional broker. Your eligibility depends on personal and policy-related factors.
Age and Health
In most cases, you must be 65 or older and have new or worsening health issues to pursue a life insurance settlement. The ideal candidate for settlement is 75 or older, as most buyers want policyholders to have a life expectancy of less than 15 years. A longer lifespan means more premium payments and a delayed death benefit, which translates to a less profitable transaction for the buyer.
If you are under 65, you may be eligible for a settlement if you have a terminal illness and a life expectancy of two years or less. This is called a viatical settlement, and it is available to terminally ill policyholders of any age. It can provide patients and their families with needed funds for medical bills, end-of-life care, or “bucket list” fulfillment.
Policy Type and Age
To be eligible to sell your policy, you must have a permanent life insurance policy, such as a universal life, whole life, variable universal life, or a term policy that has a conversion rider. You can sell convertible term policies only after you’ve converted them, and only if you meet age and health status requirements.
Additionally, most policyholders are not eligible for settlement payouts until they’ve been paying for the policy for 2 years or more. Talk to a settlement broker or your financial advisor to learn whether your policy is eligible.
Why Transparency Matters Throughout the Sale Process
Policyholders often ask us whether life settlements are a good idea. The answer depends completely on your circumstances and financial needs. A broker can walk you through the process and discuss the pros and cons.
Payouts and Death Benefits
Whether you settle or surrender your policy, your beneficiaries will no longer receive your death benefit. A surrender cancels the benefit, whereas a settlement transfers it to the buyer.
If you want to leave money behind for your heirs, retaining all or even a portion of the policy may be your best option. If having cash on hand is a higher priority, it’s important to remember that settlement payouts are often much higher than what you’d receive from a surrender.
A broker can provide an estimate of your policy’s value and discuss the implications, including potential tax responsibilities. Having an honest and knowledgeable advocate is a major advantage when you’re making these calculations.
Time Frames
A life settlement typically takes at least 90 days to complete. This includes completing the application, valuing the policy, and shopping it around to providers. The brokers at Life Settlement Advisors are skilled and efficient at every stage of this process, but negotiations always take time.
Surrendering is typically faster than settling. Many insurers can process your request and send the payment within a few weeks. Your broker can help you establish your priorities and discuss options without pressure.
Partnering With Your Professional Advisors
At Life Settlement Advisers, we’re not here to take over your finances or life insurance policy management. Our goal is to be a valued part of your financial team, helping you reach your goals as efficiently as possible.
As brokers, we collaborate with financial planners, certified public accountants (CPAs), and attorneys to help your life insurance policy work for you. We rely on their knowledge of your goals and priorities to advise you, guide the process, and help you maximize the benefits of your life insurance policy.
Contact us today to learn more about our process.
