Once the life settlement transaction is completed, the original policyholder no longer makes premium payments on the policy; this responsibility becomes that of the company or investors who purchased the unneeded life insurance policy in the secondary insurance market.
Two financial benefits
One obvious benefit, then, is that this money that was once put toward the premium can now be used for other expenses. Also, the proceeds from the sale of the policy is delivered as a lump sum of money, which can also be used to for other expenses.
The process
After the policyholder and his or her financial advisor determine that the life settlement option is the best for the family’s needs, the conversion process begins.
Step One: The policyholder obtains a free, no-obligation valuation of the policy.
Step Two: Once the policyholder has determined that he or she will move forward with the life settlement process, paperwork is required. This paperwork includes but is not limited to a life settlement application, a copy of the life insurance policy, an annual schedule of policy details, which is also known as an in-force ledger, to age 95. In addition, the policyholder supplies an authorization form and two years of medical records.
Step Three: A life settlement team, which consists of the broker and advisor, markets the unwanted policy on the secondary insurance market. This allows investors the opportunity to bid against each other for the policy. In turn, this typically yields a higher offer than simply selling to one buyer.
Step Four: A life settlement advisor will bring the seller the most competitive offer for the unwanted policy. Afterwards, the seller provides final approval and accepts the offer. The advisor handles all marketing, shopping, and paperwork involved in the process.
Step Five: All legal documents are signed at an official closing.
Step Six: The funds from the transaction are deposited in an escrow account until the life insurance policy beneficiary and change of ownership is verified.
Step Seven: Funds are wired to the seller after the policy transfer has been finalized.
The life settlement process typically requires one to four months to complete. This length is often affected by how quickly the seller of the policy returns the required paperwork in addition to the policy’s complexity.
If you or someone you know has an unwanted life insurance policy, contact us. The life settlement option may alleviate some of your family’s financial burden. We are happy to discuss this option with you.