Life Settlement – What is it and how does it work?

A life settlement is a financial transaction in which a policy owner who owns an unnecessary or unwanted life insurance policy sells the policy to a third party for more than the cash value offered by the life insurance company. The buyer becomes the new beneficiary of the policy at expiration and is responsible for all subsequent premium payments. The life settlements are an important development because they have opened up a secondary market for life insurance where policyholders can access the fair market value of their policies, rather than accept the lowest cash surrender value of the issuing life insurance company.

Generally speaking, life settlements are an option for high net worth policyholders age 65 and older. Independent estimates report that among this group, 20% of policies have a market value that exceeds the cash value offered by the insurer. And while many policyholders aren’t familiar with life settlements until a financial professional mentions the option to them, the concept has caught the attention of high-profile advocates including Warren Buffett, former US Representative Bill Gradison and numerous other policyholders. media, including The Wall Street Journal. , Time Magazine, Business Week and The Economist. A growing number of experts now believe that informing clients about the offer of life settlements should be part of a financial adviser’s fiduciary duty.

How does it work

In a life settlement transaction, there is a chain that runs from the seller of the policy to the ultimate purchaser of the policy (known as life settlement provider.) Each link in the chain has a different responsibility to facilitate the transaction and ensure it runs smoothly, while third-party providers often assist the provider with specialized functions.

It’s what we do

Our niche was formed to meet the changing demands of trusted advisors and their clientele, who are increasingly taking advantage of the burgeoning secondary life insurance market. The market is booming as customers realize the $108 billion* of existing policies have unrealized potential in excess of their cash surrender values. Advisors maximize these gains for our clients, who are rapidly becoming more sophisticated and savvy about these opportunities. Our directors have more than 75 years of combined financial planning and insurance experience, helping to integrate life settlements into a client’s financial, estate and/or other goals. All principles hold NASD securities licenses (in good standing) and offer the services of a broker/dealer to facilitate life settlements on variable policies. Variable policies are considered by many to be securities transactions.

This process used by our advisors ensures your client the best possible offer for their policy. This process includes understanding the client’s objective, reviewing alternative solutions (if requested) with their advisors, pre-qualifying all cases for the likelihood of a settlement, reviewing each case by in-house risk impaired specialists before it goes to market , and move the case forward and offers transparency through the proprietary TOP program.