Can I just surrender my policy back to the insurance company instead?

June 30, 2016
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One option that life insurance policyholders do have is to surrender the unwanted policy back to the company that issued it. While this is definitely an option, this may not be the best option for everybody.

Often, a life settlement may be a more beneficial option for those with an unneeded life insurance policy.

Before choosing to surrender the policy back to the insurance company, policyholders should think of all their options.

Weigh the options

One survey by Conning and Company estimates that over 20% of life insurance policies on seniors have a greater value than the cash surrender value of the policy.

So, if these seniors chose to surrender the policy instead of taking the life settlement option, they could be leaving significant sums of money on the table.

Advantages of a life settlement

The United States Government and Accountability Office discovered that in the year 2010, those policyholders who chose the life settlement option received between four and seven times the money that the cash surrender value would have offered them.

In the United States, more than $100 billion worth of life insurance policies exceed the cash surrender value of the policies.

A new perspective

Because these numbers are shocking to most, consumers must be aware of their options before choosing to surrender the policy. Policyholders should view their policies as they would other assets.

The secondary insurance market has exploded in recent years, which highlights the fact that more investors and more financial institutions are looking at the life settlement option as a viable financial tool. They feel life settlements serve as another wealth-building tool that may provide their clients with more financial options.

 Choose value

Weigh all of your options carefully before you decide to surrender the policy back to the insurance company. You may be leaving money on the table, money that you and your family could use for other expenses.

Before choosing any option with your life insurance policy, look at all options carefully. Then, contact your financial advisor for the possible benefits of the life settlement option. He or she can help you determine if a life settlement is a better option than surrendering your policy back to the insurance company.

If you or someone you care for has an unneeded or unwanted life insurance policy, contact us. Your first consultation is complimentary and will inform you of your options in regard to a life settlement.

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After the life settlement transaction is complete, am I still responsible for the payments?

June 23, 2016
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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.

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When is a life settlement not the best choice?

June 16, 2016
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No doubt that life settlements offer thousands of seniors financial options that benefit them and have paid millions of dollars to policyholders who no longer need their life insurance policy. Even with all of these benefits, a life settlement may not be the best option for every senior.

If you have an unneeded policy and are considering a life settlement, make sure you consult your financial advisor prior to making any decisions and consider the follow questions carefully.

Is there still a need for a life insurance policy?

If your beneficiary of the policy still needs the benefits should the situation arise, consider keeping the policy. If they are financially independent and do not need the policy’s benefits and would not financially struggle, perhaps selling it would be beneficial.

Can you still afford the premium payments?

If you or your family are not having difficulty meeting the policy’s premium payments, then consider continuing to pay them. Some policyholders who are in financial distress choose to sell the policy in order to free up the money put toward these payments. If you are not in need of this money, or if your family is comfortable making the payments on your behalf, consider keeping the policy.

Do you need a lump sum of money?

If you and your family need a lump sum of money to ease money burdens, then perhaps a life settlement could help. The seller receives a lump sum of money for the sale of the policy and is no longer required to pay the policy’s premiums.

However, if you and your family are not experiencing financial strain, then consider keeping your policy. If you are comfortably able to pay the policy’s premium, then consider keeping the policy.

Other options

Always discuss financial decisions with your financial advisor. A life settlement continues to be a wise decision for thousands of people with a growing number daily. It has helped many ease the financial burden they are feeling later in life. This may be you.

However, another option may be a better option to a life settlement. These might include a loan, accelerated death benefits, or the cash surrender value of the policy. You should discuss all options with your advisor.

If you or a family member is thinking about a life settlement, contact us. We are happy to offer a complimentary evaluation of your policy and discuss the many benefits a life settlement can offer.

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When does a life settlement make the most sense?

June 9, 2016
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A life settlement makes sense for several reasons. A life settlement transaction involves selling an unwanted life insurance policy to a third party on the secondary insurance market.

After the policy is transferred to the buyer, the seller does not pay the premium any more. All of the policy’s benefits of the policy now belong to the new owner of the policy as well. The seller, in turn, receives a lump sum of money for the sale of the policy.

Policyholder options

Over the last decade, the life settlement industry has experienced an explosion. This is due to information; policyholders are now aware of the life settlement option. There are several times when a life settlement may make sense:

Policy is no longer needed

Some choose to sell their policy because they no longer need it and having the money now would be more beneficial to them and their family.

Proceeds to meet family’s needs

Once the policy is sold on the secondary market, the seller receives a lump sum of money. This money may be used for any purpose that the seller wishes.

The Life Insurance Settlement Association, or LISA, explains the most common reasons seniors choose to sell their life insurance policies.

These reasons include:

  • The policy is about to lapse or nearing expiration.
  • The policy’s premium is too expensive.
  • Long-term medical costs
  • Life changes, including death of the beneficiary, a divorce, paying off a mortgage.
  • Donating to a charity.
  • Policyholders wish to sell the policy in order to obtain a better one
  • The policyholder simply needs money to cover living expenses.

Valuable financial tool

A life settlement may offer a valuable financial tool for seniors who are in need of money now. Rather than allowing a life insurance policy to lapse and receiving no money despite the premiums you have paid for years, or surrendering the policy back to the insurance company, usually pennies on the dollar. Life settlements offer policyholders options so they can determine the most beneficial for them. .

A life settlement may be a wise financial choice for seniors whose policy is about to lapse, or if the premium is becoming too expensive, or if they simply do not need the policy anymore. Consider all of your financial options before determining the best for you.

If you or someone you care for is interested in learning more about the options that life settlements offer, contact us today. The initial consultation is complimentary and highly informative.

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What are tax implications on life settlement proceeds?

June 2, 2016
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Consider the taxes

Life insurance policies are an asset, just like real estate or any other possession. So, when a individual goes to sell an unwanted life insurance policy in the secondary insurance market, he or she must consider if taxes will need to be paid on the sale.

Because when an unwanted policy is sold, the Internal Revenue Service may see the sale as an income, policyholders must consider this fact before they decide to sell. Only in the last decade because of the extreme momentum in the secondary insurance market did the IRS establish guidelines regarding life settlements.

Policyholders should most definitely seek the advice of their financial advisor before deciding to sell an unwanted life insurance policy.

Taxes vary according to the policy type

For each type of policy that is eligible for sale in the secondary insurance market, the way the taxes are figured is different.

Policies that are typically eligible for sale include term life insurance policies, whole life insurance, cash value insurance, and several others.

A financial advisor and tax attorney can better help individual policyholders understand the taxation for their specific policy. Because these taxes vary vastly, considering them on a case by case basis is advised; afterwards, you and your advisor can determine the best financial decisions.

IRS rulings

The IRS has established guidelines regarding the taxes from a life settlement transaction.

The first IRS guideline states that no tax will be collected on the amount equal to the policyholder’s adjusted basis in the policy. To determine this number, deduct the cost of the life insurance from the total of premiums paid.

The second IRS guideline states that the difference between total premium amounts and the policy’s cash surrender value would be taxed as ordinary income. Therefore, traditional tax guidelines would apply. This would apply to surrendering the policy as well.

The third IRS guideline states that the proceeds received from the sale of a life insurance policy over the cash surrender value (CSV), is taxed as long term capital gain money. The policy would be considered a capital asset and would be taxed like one, with a 15% maximum tax rate.

Some tax experts feel these guidelines are difficult to decipher, so speak with your financial advisor for specifics in regard to your policy.

Professional assistance

Contact your tax advisor before making any financial decisions. He or she can help you better determine the tax costs, if any, associated with selling your unwanted policy.

After you are aware of the specific tax implications of selling your policy, contact us. We are happy to discuss the life settlement process.

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How are consumers protected in the life settlement industry?

May 26, 2016
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State regulations


Life settlement regulation exists in 42 states. This means that over 90% of the population is protected through consumer protection legislation.

The goal of this legislation is to ensure that all parties involved in a life settlement transaction conduct themselves in a professional, ethical manner. Further, most states require that individuals are informed of their life settlement choice in a clear, straightforward manner.


Clear communication about the life settlement option translates into consumers being informed of the life settlement option as well as other options they may have with their policy. This information allows them to make informed decisions regarding their unneeded life insurance policy.

Further, this also requires life settlement providers and life settlement brokers be licensed in their respective states, much like a real estate agent is.


Many states require that life settlement companies ensure their clients are protected from fraud. Legislation requires that companies take a proactive stance in this regard and make sure that the policies being bought and sold are in fact legitimate policies.

More current legislation

The past few years have seen a few changes in regard to the life settlement industry. As of 2010, the Life Insurance Consumer Disclosure Model Act mandated that seniors who own a policy that is about to lapse be informed in writing of all of their options, include the life settlement option. This Act helps ensure that seniors make informed financial decisions.

Pleased consumers

In 2012, commissioners in each state reported a total of two complaints in the life settlement industry. Both of these were addressed and closed. This is in stark contrast to the life insurance carriers, who accumulated approximately 8,000 complaints in 2014. This means that thus far, consumers are very pleased with the life settlement industry.

Continuing legislation

Several state leaders have introduced laws that would require seniors with a life insurance policy to be informed of the life settlement option as a solution to pay for long-term care.

These measures that have been carried out over the past decade or so have strived to inform seniors of their options with their life insurance policy that they no longer need. In the past, seniors and their families have been relatively uninformed about the life settlement option.

Unfortunately, many have chosen to allow their policy to lapse or surrendered the policy back to the insurance company when this may not have been the most lucrative option. Although these may be viable options for some, seniors should be fully aware of all of their options with the unneeded policy before making a decision.

If you or someone you care for has a life insurance policy that is no longer needed, contact us today

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How did the secondary market for life insurance begin?

May 19, 2016
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Early beginnings

The beginning of the life industry dates back to 1911. One Supreme Court case, known as Grigsby versus Russell, established what we know today as the secondary insurance market.

This Supreme Court case lay the foundation for the explosion in the secondary insurance markets that we see today. This case named a life insurance policy as an asset, one that is able to bought, sold, and transferred just like any other asset. This ruling, though it occurred more than a century ago, allowed the life insurance policyholder to be in charge of all decisions in regard to the life insurance policy.

Effects of the ruling

Further effects of the Grigsby versus Russell ruling include the policyholder’s ability to assign and change the policy’s beneficiary as well as using the policy as collateral for a loan. Other abilities include the ability to borrow against the policy and selling the policy.

Beginning of an industry

The 1980’s was the decade that saw a drastic increase in the life settlement industry. This was due to the AIDS epidemic. Some victims of this disease had a relatively short life expectancy at this time. Therefore, some did not need their life insurance policies.

Unfortunately, many insurance companies did not cover the treatments these victims sought, so they would sell their policies to get the money for the treatments.

As those with AIDS began to live longer lives because of medical advances, the selling of policies gradually decreased; in addition, the life settlement industry emerged during this time.

Improvements to the industry

The government began initiating guidelines for the life settlement in about 2001, as the life settlement industry experienced a rebirth of sorts. These guidelines sought to ensure that the sellers of the life insurance policies and the buyers of the life insurance policies maintained ethical guidelines and business practices. Since then, many more consumer protections have been initiated throughout the country.

Also during the early 2000’s, investors took notice of life settlements as wise investments. This new method of investing was a great tool to diversify their portfolios.

The life settlement advantage

The United States Senate Special Committee on Aging conducted a study in 2009. The results showed that life settlements, on average, result in eight times more money to the policyholder than accepting the cash surrender value of the policy. This means when policyholders are no longer in need of their policy, a life settlement may be the most beneficial financial option.

If you currently own a life insurance policy that you no longer need or want, contact us. We offer a complimentary evaluation of your policy.

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Who buys the policies in the secondary market?

May 12, 2016
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The Department of Insurance licenses life settlement providers in each state. These life settlement providers are then able to purchase life insurance policies from the secondary insurance market. Included in the companies that purchase life settlements are names such as Wells Fargo and TransAmerica.

These life settlement providers sometimes purchase policies for institutional investors such as banks, corporations and other funding sources like mutual and pension funds.

When did this secondary insurance market begin?

Even though selling unneeded or unwanted policies on the secondary insurance market has been legal since 1911, this process was uncommon until the 1980’s. During the 1980’s, even more limitations existed than do today.

Grigsby versus Russell is the Supreme Court case that established what is now the life settlement industry. This 1911 case formally established life insurance policies as an asset that can be bought, sold, or transferred as any other asset. Since 1911, life insurance policies have had the same status as real estate and other assets.

Are life settlements regulated?

Absolutely. Life settlements require licensing from both the buyer and the seller of the policy. These individuals who purchase and sell these policies must maintain licensing in their respective states.

Further, more than forty-five states currently have consumer protection in the life settlement industry.

Do seniors know about the life settlement option?

Some do, and the word is spreading. Over the last decade, this industry has experienced tremendous growth. This growth is attributed to financial advisors, accountants and other financial experts explaining the benefit a life settlement may provide his or her client.

Further, several states require that these experts share the life settlement option with their senior clients. Other states have followed suit and are attempting to enact legislation that would require this as well.

These two changes have increased the use of life settlements for seniors across the country.

When is a life settlement a sound choice?

Before making any decisions that may affect your future finances, consult your financial advisor. Keep in mind that a life settlement is a viable option for seniors in some cases. These may include illness, death in the family, or financial hardship. Any senior who is experiencing these hardships should discuss the life settlement options with his or her advisor or estate planner.

If you would like to hear more about the life settlement process, contact us. We offer a complimentary evaluation of your policy

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Why didn’t I know about life settlement options?

May 4, 2016
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As of the year 2009, over 150 million people owned life insurance policies. We certainly realize its importance in protecting our loved ones as these policies totaled more than ten trillion dollars.  No one can doubt the peace of mind that a life insurance policy can provide at certain points in our lives.

The question becomes what to do with the policy once you and your family are no longer in need of the coverage a life insurance policy provides.

Reasons you may no longer need your life insurance policy

Some of the reasons policyholders feel they do not need their policies any longer include life changes, the expense of the policy itself, and a lack of need for the policy.

As life changes come about, policyholders may need medical treatment that their insurance company does not cover. Because the money from a life settlement can be used however the seller wishes, many choose to sell their life insurance policy to fund medical treatments for themselves or family members.

Sometimes as we age, money becomes more of an issue because of the increase in cost of living and the lack of income. A life insurance policy that is not needed any more can be one more expense for some people. A life settlement therefore allows them to receive a lump sum of money and they no longer have to make payments on the policy, which frees up some of their income.

Lack of need for the policy often occurs as people age. Sometimes the beneficiary of the policy is no longer living, or perhaps is no longer in need of the policy’s benefits. A life settlement becomes one way of saving some of the policy’s value, rather than simply allowing the policy to lapse.

Many consumers are unaware of their options

Unfortunately, the vast majority, over 90% according to life insurance experts, of policies lapse before they ever pay out a claim. Had these individuals been aware of the life settlement option, they may have been able to retrieve some of the policy’s value.

Laws and guidelines change

The last decade has seen explosive growth in the life settlement industry.

Life settlements have gained momentum because of laws in states such as Texas, which realizes the benefits that unneeded life insurance policies may provide for those in need of long-term care. In fact, some states have enacted legislation that requires life insurance agents to explain what a life settlement is. So, the more policyholders who realize that a life settlement is a viable option for an unneeded policy, the more who choose a life settlement.

It’s about choice

Thanks to government legislation, many more policyholders are becoming aware of the life settlement option. Many seniors now consider a life settlement as a tool to meet their future financial needs. They now realize that their policy is an asset that should be treated as such.

Contact us if you are interested in hearing more about the life settlement option.

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Are there restrictions on how I can use the proceeds from a life settlement? And answers to other life settlement questions

April 26, 2016
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Life settlements allow seniors an option for liquefying one of their largest assets, their life insurance policy. A life settlement occurs when an individual, business, or other entity sells a life insurance policy on the secondary insurance market for a lump sum of money. A third party then purchases the unwanted policy for an amount that is greater than the policy’s cash surrender value (CSV). The lump sum of money received from the sale is the policyholder’s proceeds.

How can you use the proceeds from a life settlement? 

Proceeds from the sale of the policy can be used for anything. There are no guidelines in place for how this money has to be spent. Further, there is not credit check or income check required.

Because a life settlement broker earns commission once the deal is completed, there are no upfront fees for a life settlement transaction.

Common uses of proceeds

Many policyholders who choose to sell their policy once they no longer need it do so to pay off debt. Others use the proceeds to pay for medical treatment and medical bills. Others use the money to obtain in-home care for themselves or their loved ones.

On the other hand, other policyholders wish to buy another asset, such as a house, pay for a college education, or purchase a business.

Can businesses sell life insurance policies?

Businesses are able to benefit from the sale of a life insurance policy.

Why would a business sell a policy?

A business may choose to sell a policy for the same reasons others would choose to sell a policy. Many business owners use these funds to transfer the business to their children.

Businesses may choose to sell a policy when their business’ internal structure changes. Business owners may want to pay off debt, buy more stock in the company, or purchase shares from other shareholders in the business.

Expert assistance

Seek expert assistance before making any financial decisions. Tax guidelines vary depending on the policy type, so speak with your tax attorney prior to making any decisions regarding the sale of your unwanted policy.

If you or someone you care for has an unneeded life insurance policy, contact us. We offer a complimentary evaluation of your policy that may help you determine if a life settlement is a wise choice for you and your family

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