Most of us might have come across the term ‘life insurance’ and most of us would even know what exactly life insurance is. However, what a number of people might not know is about the term ‘life settlement’. The concept of what is a life settlement is really easy to understand. A life settlement is selling your life insurance policy to an investor or buyer in exchange for money. Life settlement brings you instant cash as you sell your life insurance policy.
Who Can Get Life Settlement?
For you to qualify for a life settlement there are a number of conditions you and your policy must meet. First of all, your policy should be a universal, whole life, or convertible term life policy. You should be 65 years or older to get a life settlement for your policy. The reason is, the more the age, the lower the life expectancy. Because of this, the buyer would get the death benefit sooner, without having to pay for too many premiums.
The policy should have a death benefit of at least $100,000. Life settlement providers and brokers wouldn’t pick policies with a lesser amount of death benefit. Besides this, based on which state you belong to, you have to own the policy for a certain amount of years before you sell it. The minimum number of years depends on your state. When you and your policy meet these conditions, you qualify for a life settlement.
Who Is Involved?
The life settlement company is still in its growth phase. It is typical of the life settlement industry to do rigorous advertising to attract more clients. They operate in an over-the-counter fashion. When you plan to sell your life insurance policy, there are two categories of professionals who can help you out- brokers and providers. These people would act as a mediator and take your policy to someone who is interested in buying. While brokers are always mediators, providers can be the buyers too.
Brokers are individual professionals who take your policy to different buyers. Providers on the other hand function as an organization, which is why they are called as life settlement company. They either sell the policy to a buyer or buy it for themselves. A broker would charge a commission to study the policy and analyze medical records. Nowadays, people prefer going to a life settlement company since the brokers charge a hefty amount of commission, sometimes as much as 40 percent of your life settlement value.
Whether you choose a broker or a life settlement company, there’s a fixed protocol that is involved in selling your life insurance policy and getting you the money. First of all, the broker or the provider would seek information regarding your policy and your medical records. After acquiring those, they analyze the information to find out if you are eligible for a life settlement.
There’s one thing here that you, as a wise client, need to care of. When you provide all the required information, make sure you get a privacy agreement signed. This ensures that whatever information you provide is kept confidential. Also, whenever the provider or broker gives away the information to another party, you should be kept in the loop.
Once the information is studied and you qualify for a life settlement, it progresses to finding out how much your policy is worth. The provider would study and construct an offer. Then this offer is brought to you. The provider or broker would explain the offer to you. When you approve the offer and accept it, you proceed to the next step.
The broker or provider would bring you all the documents that need your signature for approval. After explaining the significance of the documents, you are required to sign these documents. The broker or provider takes these signed documents to the insurance company and submits them. After going through the documents, the insurance company hands the documents over to an escrow agent who keeps it for a while.
As you, the buyer, and the escrow agent receive a confirmation from the insurance company, the escrow agent gives the documents to the buyer and the ownership of your policy is officially transferred to the buyer.