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Insurance Policy Settlements

FAQ's (Frequently Asked Questions)

Q: What are Insurance Policy Settlements?

Life and annuity policies are an "assignable asset." Just like your home or other assets, it can be given away, transferred to new ownership, or sold to anyone the policyholder chooses. Life or annuity policies can be sold to a third party. The owner of a life insurance policy sells the policy for a cash payment that is less than the full amount of the death benefit - but for an amount that is higher than the cash surrender value. The buyer becomes the new owner and/or beneficiary of the life insurance policy, pays all future premiums and collects the full amount of the death benefit when the insured dies.

Q: What are examples of changing life circumstances that would motivate a policyholder to sell their life or annuity policy?

Insurance policy settlements are not appropriate for everyone, but in many situations it can be a prudent financial decision. Examples of such situations might involve the following scenarios:

Family dynamics or financial circumstances have changed, and the policy is obsolete or no longer needed for its original purpose.
The policyholder determines that he/she can purchase a better-performing policy with today's more affordable premiums (due to a change in the mortality tables indicating seniors are living longer.)
Policyholder can no longer afford the high premiums, and wishes to use the life settlement proceeds toward replacement coverage that will lower or eliminate premiums.
The beneficiary for whom the policy was purchased is deceased.
The policyholder wishes to remove a policy from an estate due to a reduction in size of the projected tax liability.
The sale of the policy would allow the policyholder to replace an individual policy with a survivorship policy or long term care insurance.
A key-man policy is no longer needed due to retirement or change in business structure
Policy owner wishes to provide cash gifts to family members
To provide funds for charitable giving
To purchase or invest in another business
To fund protracted litigation or attorneys fees

Q: What types of policies qualify for a life settlement?

Universal Life Insurance
Term Life Insurance
Whole Life Insurance
Variable Universal Life Insurance
Survivorship Life Insurance (any type)
Annuities
Structured settlements (Payments over time)

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