How to Perform a Life Settlement

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By mtwyman
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life settlement

With the hard economic times we’ve all been facing, everyone is searching for a way to stay afloat. For seniors, this is an even more difficult task than for a working age individual. Most seniors live on a set dollar amount every month, and with the way costs have sky rocketed, they may be finding themselves in a bind.

What most seniors don’t know is that they have a secret weapon, one that most American’s don’t…life insurance.

That’s right, life insurance! What you may not know is that life insurance can be sold to institutional investors who pay you a lump sum for your policy, in exchange for becoming the owners on record. What this means is that they are giving you an amount that is generally smaller than the face amount of the policy, but larger than the cash value of the policy. They then collect the full death benefit when you pass away. This serves as a guaranteed asset for the investing company that they can use to leverage other business transactions with. You must be at least 65 years old to perform a life settlement and have a policy worth $200,000.00 or more. Providers prefer Universal Life policies, Variable Life policies, and Convertible Term policies. Whole Life policies can be sold as well but the market isn’t as large.

I know, it sounds morbid, but think of it like this, you will never see a red cent from this policy…ever. You are paying on this policy and not receiving any benefit from it. This policy was created to benefit your “beneficiaries”. Well, what if all of your beneficiaries were your children, and now years later, they are all grown up and extremely successful? What if they are financially fit and secure? Why are you still considering providing a benefit to them, when they have no need for it. What if you purchased life insurance to protect your assets 20 years ago, and now you are worth triple the amount that you were then? In this case you are no longer protecting your assets, you are using your assets up and not receiving anything back in return. You may also fall under the category of just needing money, hey sometimes the simplest explanation is the best.

Outlined here, are several steps you can do to get your policy sold to a credible institution by an experienced agent such as myself. Let me just lay out some general rules here first.

1. Do not send an agent a policy that has already been shopped to life settlement providers. They hate this because it makes them re-price a policy that they have already invested funds into. This usually causes the provider to “black-list” the owner of the policy and not make an offer to them ever again.
2. Be honest with your agent. If you keep information from them, they will not be able to sell your policy. You could get all the way down to the contract stage and have the whole deal fall apart because of withheld information. Do not make this mistake.
3. Provide all medical records from every doctor you regularly see. This is crucial.

Difficulty: Moderately Challenging

Instructions

Things You'll Need:

Life Insurance Agent
Life Insurance Policy $200,000 +
Patience
Medical Records
Copies of IDs

Step 1

senior life settlement

First, you must acquire all of your policy information. This includes your ORIGINAL POLICY (if you can’t find this, contact your carrier and they will send you a duplicate), trust forms (if any), copies of your driver’s license, passport and social security card. You will also need to gather all of your medical records from every doctor that you have seen. Generally, medical records are the biggest set back in the life settlement process. Missing one doctor can set you back 3 months. It already takes around 4-6months to get your policy sold, imagine adding another 3 months to that!
Step 2

senior life settlement

Second thing to do is find a life insurance agent that understands the life settlement industry. This is tricky. As a note, most agents haven’t heard of a life settlement, and fewer have actually participated in one. I worked for a life settlement broker and took cases from start to end; meaning I called the agent and received the policy as well as contacted the institutional investor and received the final contracts. You should look for an agent that has this kind of experience. Although other agents may mean well, they don’t always know how to get the best deal out of a provider. This hurts your pockets as well as your agent’s.
Step 3

senior life settlement

Once you have secured an agent, ask them some questions pertaining to time frames and the chances of your policy getting sold. Keep in mind, no agent can tell you how much you will get for your policy. Let me repeat; NO AGENT can tell you how much you will get for your policy. This is a crucial bit of information that you must take heed to. If an agent tells you otherwise, then you need to pack up your policy and look for a new agent to represent you. There is no way that they can say what the financial status and needs are of an investment bank. They have no idea what kind of purchasing accounts, if any, are set up at an institution. If they say they do, they are lying. They also don’t know what the actuaries will say about your age, health, etc. Always remember that your agent gets a commission from the sale of this policy, don’t let their greed rule your decisions.
Step 4

senior life settlement

After handing over all of the information that was outlined above; i.e. copies of ids, policy, trusts, medical records, etc, you should contact your agent approximately once every week for a progress report. Remember, these transactions take time and are dependent on many factors. If there is a delay, it is not your agent’s fault. Just relax and let him do his job.

If you should get a high bid, your agent will call you and tell you what offer you’ve received. You always have the right to decline the offer or to ask them to try for more money. Don’t get greedy, if you irritate the provider, you could lose the offer altogether.
Step 5

If you should accept the offer you will receive a “book” of documents to sign and get notarized. You must listen to your agent very carefully at this stage. If you sign, or date something that you are not suppose to then you will delay the process. You will also have to get signatures from any beneficiaries that you have on the policy as well as from trustees and POAs.

Once all of the paper work is turned in, it becomes a waiting game. At this point you are waiting for the policy carrier to make the required changes. Once the changes are made, the provider will issue payment to the broker and to you and your agent.
Step 6

Now you just get to enjoy money that you never knew you had!

Comments

caspita said

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on 30/10/2009 Learn something new everyday. Thanks so much.

cca1049501 said

on 28/10/2009 Great article, I will pass this on!! Thx!

steph9280 said

on 28/10/2009 Interesting information on how to perform a life settlement. 5*

riefderrico said

on 27/10/2009 Nice article, I didn't know what a life settlement was - thanks for the info.

lighthouse1958 said

on 26/10/2009 Great advice, thanks. 5* and rec. We have life insurance for the other one who is left behind. We want them to be out of debt with everything. Especially sense only one will be working then, and it's hard to live comfortably now days with just one working unless your rich. Great article.