1. What exactly is a “life settlement”?
A life insurance settlement is the sale of a life insurance policy – usually insuring the life of an individual age 65 or older – to a third party for an amount greater than the cash surrender value.
Life settlements allow the owner of a policy to obtain a cash payment while the new owner assumes the rights to the policy. The new owner continues to make the premium payments and, therefore, receives the proceeds from the death benefit.
2. Why would I consider the sale of my term, universal or whole life insurance policy to a life settlement company?
Some of the reasons why you might consider selling your life insurance policy include:
- The life insurance policy is no longer needed or wanted.
- The premium payments have become unaffordable.
- Considering surrender of the policy for cash surrender value.
- The policy is going to lapse.
- Change in estate planning needs.
- Insured qualifies for a new policy which is more affordable than the old policy.
- The policy is owned by a business insuring a key employee, and the business no longer needs the coverage the policy provides.
- Financial circumstances have changed and there is a need for cash now to improve quality of life or cover expenses.
- Change in life circumstances (such as divorce or death).
- Opportunity to provide a gift to a family member or charity.
3. How much money will I get if I enter into a life settlement contract?
The amount of money you receive will depend upon a number of factors, including age, medical condition, type of life insurance policy (e.g., universal life, whole life, term), amount of death benefit, rating of the issuing insurance company, and the amount of premium necessary to keep the policy in force. If your policy has a cash value upon surrender, the amount you receive should be greater than the cash surrender value of your policy.
4. How is my privacy protected?
Any medical or health-related information is protected under federal HIPAA regulations. At Genesis, we’ve implemented strict security procedures, including computer safeguards, to ensure all our clients’ confidential information stays that way. You should always verify that the company you deal with has systems in place to protect your confidentiality.
5. Are the proceeds of life settlements taxable?
You should consult your tax advisor or legal professional for additional tax information. While Genesis does not provide tax or legal advice, we will be happy to discuss these issues with your advisor.
6. How long does the process take?
One we receive your completed life settlement application and applicable forms, the process can take anywhere from 6-10 weeks. However there are circumstances where a case may take a much shorter time or even a longer period of time. It all depends on different variables involved with the specific case.
7. Is a cash settlement my only option?
For the most part yes. However, under certain circumstances and for certain cases a fund or provider will offer a retained death benefit as a settlement option. This option allows the seller to maintain certain beneficiary rights for a portion of the death benefit.
8. What are the criteria used to determine the value of a life insurance settlement?
Many factors determine the value of your life settlement. Some of them include:
- Medical History of the insured
- Life expectancy
- Face amount of policy
- Loans on policy
- Cost of insurance
9. How does the life settlement process work?
- A Genesis application and additional starting forms are completed
- Medical records, life expectancy studies and policy information are obtained by Genesis
- Genesis negotiates with all applicable provider and funding sources to obtain the best offer the market will allow
- If an offer presented to the policy seller is accepted, an offer letter, disclosures and closing contracts are presented to the policy seller
- Once all documentation and requirements are completed in their entirety, funds are escrowed and change forms are submitted to the carrier
- Once changes are recorded and confirmed the funds are released to the seller
10. Are life settlements regulated?
Most states regulate life settlement transactions. Varying regulations apply to licensure, approval of forms, requirements of the carrier etc. For more information on a specific state, please contact us.