Life Settlement – What is it and How Does it Work?

Life Settlement – What is it and How Does it Work?




A life settlement is a financial transaction in which a policy owner possessing an unneeded or unwanted life insurance policy sells the policy to a third party for more than the cash value offered by the life insurance company. The purchaser becomes the new beneficiary of the policy at maturation and is responsible for all later premium payments. Life settlements are an important development in that they have opened a secondary market for life insurance in which policy owners can access fair market value for their policies, instead of accepting the lower cash surrender value from the issuing life insurance company.

Generally speaking, life settlements are an option for high-net-worth policy owners age 65 or older. Independent estimates report that among this group, 20% of policies have a market value that exceeds the cash value offered by the carrier. And while many policy owners are unfamiliar with life settlements until a financial specialized mentions the option to them, the concept has attained attention from high-profile proponents such as Warren Buffett, former U.S. Representative Bill Gradison, and numerous media supplies including The Wall Street Journal, Time Magazine, Business Week and The Economist. A growing number of experts now believe that informing clients about offering life settlements should fall under the fiduciary duty of a financial advisor.

How It Works

In a life settlement transaction, there is a chain leading from the seller of the policy to the end buyer of the policy (known as a life settlement provider.) Each link in the chain has a different responsibility in easing the transaction and ensuring that it runs smoothly, while outside vendors typically assist the provider with specialized roles.

Its What We Do

Our niche was formed to meet the changing demands of trusted advisors and their clientele, who are increasingly taking advantage of the booming secondary market for life insurance. The market is thriving as clients become aware of the $108 billion* of existing policies that have unrealized possible in excess of their cash surrender values. Advisors maximize these gains for our clients, who are quickly becoming more complex and knowledgeable of these opportunities. Our principals have over 75 years of combined experience in financial planning and insurance, helping integrate life settlements into client financial, estate and/or other goals. All principles continue NASD securities licenses (in good standing) and offer the sets of a Broker/Dealer in easing life settlements on variable policies. Variable policies are considered by many to be regarded as securities transactions.

This course of action used by our advisors ensures your client the best possible offer for their policy. This course of action includes understanding the goal of the client, reviewing different solutions (if asked) with their advisors, pre-qualifying all situations for the likelihood of a settlement, reviewing each case by in-house impaired risk specialists before it goes to market, and making the case progress and offers transparency by the proprietary TOP program.




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