Thinking about a life settlement? Inform yourself and get an estimate first.
Since the 1980s, life settlements have become an increasingly popular way to fund retirement, long-term care, and other later-in-life financial needs. The concept is simple: sell your life policy to an institutional investor in exchange for cash. The investor then takes over premium payments and collects the death benefit after you pass away.
But how do you find investors willing to buy, how do you know you’re getting a good deal, and the bottom line: How much could you collect?
Go in with an understanding of the process
Life settlements are typically handled by a company that buys and bundles policies into investments that institutional investors can buy. The concept is simple – one buyer, one seller, one insurance policy – but the life settlement process and paperwork can be complex. Often, policy owners use a broker to advocate for them with the life settlement company. But determining how much an investor is willing to pay — if anything — involves many factors, including the insured person’s age and life expectancy. Do some research on how these factors can affect your eligibility for a life settlement, and how the potential buying company might collect the information and use it in decision making.
Take a look at the team’s credentials
A first step, according to Brad Mueller of Monarch Insurance Partners in Madison, Wisc., is to check to make sure any life settlement broker or provider is licensed in your state.
“You can usually find an online lookup tool on your state insurance commissioner’s website,” Mueller offers. “Also, ask the broker whether they have experience in life insurance beyond life settlements. Do they understand life insurance itself, enough to help you decide whether to keep or sell your policy?”
“Ask the broker whether they have experience in life insurance beyond life settlements. Do they understand life insurance itself, enough to help you decide whether to keep or sell your policy?”
Mueller adds that other credentials, such as the CLU® and ChFC® designations (Chartered Life Underwriter and Chartered Financial Consultant) signal that the broker has passed several exams and engages in continuing education in the field.
Ask how your policy will be marketed
Some companies buy life insurance policies directly from consumers, in which case you’ll be presented with a single, take-it-or-leave-it offer for your policy. Other companies that buy insurance policies buy through brokers, whose job it is to shop your policy around, looking for the highest selling price. Some life settlement brokers take it a step further, setting up an online auction for your policy. Qualified buyers then bid against each other, potentially pushing the sales price even higher.
Start with an estimate
Several online calculators can give you a baseline idea of the selling price your policy might receive.
“You’ll need to provide your name, age, sex, health status, and the amount and type of insurance,” Mueller said. “With a few points of information beyond an online calculator, we can provide a more accurate estimate.”
Keep in mind that these estimates are starting points. Your ability to find a buyer and the actual selling price will vary.
To learn more about life settlements, call Monarch Insurance Partners at 608.620.0596. Visit monarchinsure.com to read more or to schedule a meeting with a licensed life settlement broker.
Valmark Securities supervises all life settlements like security transactions. Its registered representatives act as brokers on the transaction and may receive a fee from the purchaser. Once a policy is transferred, the policy owner has no control over subsequent transfers and may be required to disclosure additional information later. If a continued need for coverage exists, the policy owner should consider the availability, adequacy, and cost of comparable coverage. A life settlement transaction may require an extended period to complete and result in higher costs and fees due to its complexity. Policy owners considering the need for cash should consider other less costly alternatives. A life settlement may affect the insured’s ability to obtain insurance in the future and the seller’s eligibility for certain public assistance programs. When an individual decides to sell their policy, they must provide complete access to their medical history and other personal information. Each client’s experience varies, and there is no guarantee that a life settlement will generate an offer greater than the current cash surrender value.
Securities offered through Valmark Securities, Inc. Member FINRA, SIPC. Investment advisory services offered through Valmark Advisers, Inc., an SEC Registered Investment Advisor. 130 Springside Drive, Akron, Ohio. 44333-2431. 1.800.765.5201.
Monarch Insurance Partners is an entity separate from Valmark Securities, Inc. and Valmark Advisers, Inc. The information contained herein has been derived from sources believe to be reliable but is not guaranteed as to accuracy and does not purport to be complete analysis of the material discussed, nor does is constitute an offer or a solicitation of an offer to buy any securities, products or services mentioned. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.
Unless otherwise noted, Valmark Advisers and Valmark Securities are not affiliated, associated, authorized, endorsed by, or in any way officially connected with any other company, agency or government agency identified or referenced in this article.