What is a life settlement?
A life settlement is a sale of a life insurance policy in which a policy owner receives a cash payout for the policy. The cash amount received is less than the death benefit but higher than the amount of cash surrender value of the policy. The life settlement provider and financing entity assume the responsibility for all future premiums and the ownership of the policy is transferred to the provider/financing entity. Life settlements are regulated transactions in most states. In the state of Florida, a life settlement is called a viatical settlement.
Why do people want to sell their life insurance policy?
There are many situations in which a life settlement should be considered. These are some examples of such situations or reasons, although this is not an exhaustive list.
- The policy owner can no longer afford to make premium payments.
- The primary beneficiary listed in the policy is deceased and the policy is no longer needed.
- The need for life insurance has decreased over the years and the policy is no longer needed. Consider these situations: the owner is now divorced, the kids are out of college and well off; debt and house are paid-off.
- The policy owner has an increased need for health and long term care insurance and other investments.
- Key executive has retired or left the firm.
- The estate of the insured/policy owner has changed – the size has been reduced and the projected tax burden has been decreased (consult a tax advisor as the estate tax laws have been changed recently).
- The policy owner just needs cash.
What are the traditional parties to a life settlement transaction?
- Policy Owner/Viator/Insured
- Life (viatical) settlement broker/Agent/Financial Professional
- Life expectancy provider
- Life (viatical) settlement provider
- Financing Entity
- Tracking and Servicing Representative
- Escrow Agent
- Trustee/Custodian
What is needed to initiate a life settlement sale or purchase?
It is recommended that the policy owner consults a life insurance agent or financial professional. If a life settlement is suitable for the policy owner, a life settlement application and releases are completed by the policy owner and insured(s). The policy owner or his/her representative can then submit the application and any additional required documents (such as illustration to maturity, medical records, and (or) life expectancies) to the life settlement provider. However, in most cases, the submission of a life settlement application and releases (HIPAA and policy release) should be sufficient to initiate a life settlement transaction.
What are the application fees paid by the policy owner?
There are NONE!
Will the policy owner/insured have to pay the life settlement provider for handling the life settlement transaction?
NO
How long does a life settlement transaction take?
It depends on the willingness of all parties to participate in the process. At Vespera Life, we aim to complete each life settlement transaction within 45-60 days of receiving each case.
Are there any tax and financial implications that the policy owner/insured needs to consider?
Yes, so please, discuss yours or the need for your client to address all relevant issues and information with a tax, insurance, legal, and/or financial professional.
Is personal information kept confidential?
Vespera Life will not share, rent, or sell owner and seller information without a written permission. An explanation of how and why any personal information will and may be shared will be provided.
What is Vespera Life’s role in a life settlement transaction?
Vespera Life is a licensed life settlement provider. As a provider, Vespera Life enters into a contract with the policy owner and administers the life settlement transaction.