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What is a life settlement?

A viatical or life settlement is the sale to a financial institution of an existing life insurance policy for more than the surrender value of the policy but less than its death benefit value. Regulatory usage of the terms “viatical settlement” and ”life settlement” vary by state. In Florida, any sale of a life insurance policy is referred to as a viatical settlement. The seller is referred to as the viator. The buyer of the policy, a licensed provider, becomes the policy owner assuming the responsibility of paying future premiums and also becoming the policy’s beneficiary.

Many people are unaware that life insurance policies are a form of property and can be assigned or sold. This was established in the 1911 U.S. Supreme Court case of Grigsby v. Russell, which held that policy owners are free to sell and transfer ownership to other parties. In the past several years an active institutional secondary market has become established to purchase unwanted life insurance policies. According to estimates from a recent Bernstein Investment Research and Management report, the secondary market purchased $13 billion in policies in 2006 and is expected to grow as large as $160 billion in the next ten years.

In Florida, licensed providers utilize institutional capital to purchase unwanted life insurance policies. These companies will competitively bid on the purchase of an existing policy taking into account the insured’s current age, health, policy provisions and general economic factors. If you qualify, it is now possible to obtain a competitive market value offer for your life insurance policy that can be up to three to five times what the insurance company typically pays in surrender value.

In order to obtain the highest offers for a life insurance policy it is important to utilize the services of a licensed viatical settlement broker. In Florida, the law states that a viatical settlement broker is deemed to represent only the viator and owes a fiduciary duty to the viator to act according to the viator’s instructions and in the best interest of the viator. A broker works to package and distribute the policy, release forms, and other required information to all providers licensed in the State of Florida. Negotiating multiple offers and counter-offers from all interested providers best assures that a policy owner will realize full market value for the life insurance policy.

Qualifying for a life settlement.

All types of policies are considered for settlement. A policy can be owned individually, or through a corporation, foundation, trust, non-profit organization or business.

In order to be a good candidate for a secondary market sale of an existing life insurance policy, the following factors should be considered:

• Policy must have been in force for two (2) years.
• Minimum $250,000 death benefit; no maximum.
• Age 65 or older with a 20 year or less life expectancy.
• All policy types are considered, even convertible term policies.
  

Benefits of a life settlement.

Life settlements provide many benefits to consumers. Most obvious is maximizing the capital available to the owner when a policy is no longer needed or affordable. Market value, not the insurance company’s surrender value, is the ultimate measure of how a policy owner is compensated on the secondary market. Consumers receive a fair, competitive settlement offer from highly capitalized companies that aggressively bid for this class of financial investment.

Reasons to consider a life settlement.

• Premiums on the policy are no longer affordable.
• The beneficiary for whom the policy was originally purchased is now deceased or no longer has a need for the policy.
• Key-man policy no longer necessary due to retirement.
• Policy owner holds multiple policies or wishes to eliminate one.
• The policy owner wishes to replace an individual policy with a survivorship policy, a long term care insurance policy, or funds for long term care.
• The policy owner requires funds to pay for medical expenses.
• The sale of the policy would allow the policy owner to maintain a desired standard of living.
• The policy owner wishes to fund charitable causes without disturbing other capital or assets.
• The policy owner wishes to remove the policy from a trust or estate.
• A reduction in the value of the policy owner’s estate reduces the tax liability that the life insurance policy was designed to provide for.
• An increase in the liquidity of the policy owner’s estate eliminates the need for the policy.
• Changes in estate tax law eliminates the need for the policy.
• Charity can no longer afford the policy premiums and wishes to cash out the policy.
  

Life settlement process.

The life settlement process begins when a policy owner consults with his attorney, accountant or financial advisor and it is determined that a life settlement could be in the best interest of the policy owner/insured. The actual process is fast, simple, with no out of pocket expenses paid by the seller.

• American Life Settlement Capital, LLC provides application and disclosure forms for the policy owner/insured to complete. The forms include a HIPPAA compliant release to allow the collection of medical records from attending physicians and specialists. All information is stored and distributed to required parties with client confidentiality the primary factor.
  
• Florida licensed life expectancy underwriting firms use the medical records to render an estimate of the life expectancy for the insured. If the estimates return in line with current investor parameters, the package is then shopped to Florida licensed providers who make offers to purchase the policy. American Life Settlement Capital, LLC will aggressively negotiate with all interested licensed providers on behalf of the policy owner. Shopping the policy to multiple funding sources ensures the absolute highest offers are obtained.
  
• Disclosure of all providers contacted as well as all offers and counteroffers received are transmitted on a disclosure form that must be signed by the policy owner prior to accepting an offer. The broker has a fiduciary duty to the policy owner to obtain the highest price available for the policy, follow the instructions of the policy owner and work only in the policy owner’s best interest.
  
• The policy appraisal process is completed at absolutely no cost or obligation to the policy owner. There are no medical exams involved. The policy owner is not obligated to accept any offers and has a fifteen (15) day rescission period from the date the funds are received if an offer is accepted.

Working with American Life Settlement Capital, LLC makes the life settlement process as uncomplicated as possible for both the policy owner and the insured’s physicians. We have simplified the process so that one application is all that is necessary to set in motion the process that will see the policy presented to all Florida licensed providers. Only one company, ALSC, LLC, will contact the policy owner’s physicians and insurance carrier.

All records are kept in strictest confidence. Information is released only to qualified parties and only used for the purpose of entering into a life settlement agreement.

People are now living longer due to advances in medicine and prudent life style choices. Funding a retirement that could last years longer than could be imagined can be a challenge. An unneeded life insurance policy can help provide liquidity to maintain a comfortable lifestyle, buy other more appropriate insurance coverage or allow the policy owner to fund charitable causes without disturbing other capital or assets.

Think about a life settlement. It could be in your best interest.