Life Settlements
About Life Settlements
What is a life settlement?
A life settlement is the sale of an unwanted life insurance policy to a licensed institutional investor. The qualified policyholder receives a lump sum payout that can be significantly greater than its cash surrender value. The purchaser assumes responsibility for payment of the premiums and becomes the policy's beneficiary.
- Life Settlement Brochure (PDF)
Life settlement case examples*:
| Sex | Male | Male | Female |
| Age | 79 | 72 | 79 |
| Policy Type | Universal | Term | Survivorship |
| Life Face Amount | $3,400,000 | $500,000 | $2,000,000 |
| Cash Value | $180,000 | $0 | $290,000 |
| Life Settlement | $640,000 | $71,000 | $390,000 |
Can a business or charity benefit from a life settlement?
In many cases, yes! A life settlement can be an appropriate option for life insurance-funded businesses whose owner has sold the business or retired. Businesses can also benefit from a life settlement when an employee, for whom key person insurance or a deferred compensation plan was purchased, has left the company. Charities and non-profits can use life settlement to monetize what may appear to be illiquid assets.
Is it right for me?
Life settlement may be appropriate under a number of different scenarios. For example, if estate planning requirements change, insurance premiums become a financial burden, a mortgage is paid off, children become financially independent, or a business is sold. The common denominator is that the existing policy no longer fits the needs of the policyholder.
Generally, good candidates for life settlement are policyholders over the age of 65 whose health has changed since their policy was in effect and whose policies have a face value greater than $250,000. However, the owner of the policy can be an individual, trust, company or non-profit. The types of life insurance that qualify for a life settlement are broad and include:
- Universal Life
- Variable Life
- Some forms of Term Life
- Whole Life
- Survivorship
What factors determine the size of a life settlement payout?
The most critical factors affecting the amount of a life settlement include the insured’s age, health and the future required premiums. The type of policy, insurance company rating, face value, outstanding loans and cash values are also important.
The payout amount is also affected by the market offer secured for your client, which can vary greatly. LifeOptions is a life settlement company. Early in the process, your LifeOptions is a life settlement broker will identify and gather all information required to estimate the amount the insured could expect to receive, freeing you from administrative hassles. Your life settlement broker will then work hard to secure the best price in the market for your client while ensuring all parties are in compliance every step of the way.
What is the tax treatment on a life settlement?
Each client should consult their tax advisor on their own tax situation. In general, the proceeds from a life settlement are tax free up to the cost basis of the policy. The difference between the policy’s stated cash surrender value and the original cost basis is taxed as ordinary income and anything above the cash surrender value is taxed as capital gains.
How does the LifeOptions process work?
To begin, contact us by phone or email to discuss your client's specific situation. You will be assigned an experienced LifeOptions life settlement who will personally work with you throughout the process.
We will determine upfront if your client is a good candidate, then work with you to secure the information required to put the policy to the market. This information includes a copy of the policy, consents and some medical information.
We then leverage our relationships with the some of the nation’s leading institutional investors in the life settlement industry to obtain the highest possible offer for policyholders.
Count on our tailored, personalized client service designed to execute fast and effective transactions while eliminating excessive administrative work.
We’ve also developed helpful tools and communication materials that you can use to educate your client and keep them informed throughout the process.
We vigorously scrutinize all our transactions to assure they are in complete compliance with state and federal regulations.
In most cases, your LifeOptions life settlement broker will personally accompany you to closings to ensure the successful and timely completion of your transaction and that all state and federal regulations are met.
There is no obligation to accept a life settlement offer and there is a rescission period if the policy owner changes his or her mind. However, the LifeOptions life settlement process is designed to ensure that we meet or exceed the insured’s expectations.
How do I get started?
We’re ready to put the life settlement to work for you and your clients! Contact us to get in touch with a LifeOptions life settlement broker.
- Life Settlement Application (PDF)
- Sales Qualifier (PDF)
Life Settlement Services
Let us put our 40 years of combined experience designing, structuring and closing transactions for such companies as GE Capital, BenefitPort, Cendant and Citibank to work for you. With our experienced industry resources and an unwavering commitment to individualized and thorough client service, LifeOptions is both highly effective and easy to do business with.
LifeOptions will work with you during all phases of a transaction and guide the process from start to finish.
Our services include:
- Evaluating your client’s policy and other factors to determine if he or she is a good candidate.
- Identifying and collecting all the information needed to estimate the amount your client can expect to receive.
- Supplying you with communication materials to educate and keep your client informed throughout the process.
- Obtaining and reviewing all of the client’s medical records.
- Preparing and purchasing Life Expectancies for funders.
- Developing a comprehensive Financial Memorandum to ensure your client’s case receives the highest priority among investors.
- Auctioning and negotiating for the highest offer based on our knowledge and expertise in the life settlement marketplace.
- Closing specialist to complete the process efficiently and effectively.