Offers are pushed higher when buyers compete for your policy.
If an insurance company made you an offer that seems low, consider a quote from a licensed life settlement broker at Windsor. The brokers at Windsor have developed a private network of buyers that will actively bid for your policy. In our experience, this bidding process consistently drives offers higher. Get a quote today.
It’s important to understand that companies that buy policies directly from policyholders can offer you a cash payment right away. Typically their offers are lower but the cash payment comes quickly and earlier in the process. For some people, receiving funds right away is the priority and a lower offer is acceptable. Windsor’s bidding process can drive offers significantly higher in about 30-90 days time.
Work with a life settlement broker to prep your policy for an auction-like process. A Windsor broker will serve as your hands-on guide through the entire process and even pay the fees associated with acquiring documents like medical records, averaging $2,500-4,000 per case.
Life insurance policyholders interested in a quote for a policy are encouraged to use a life settlement calculator. If the calculator results suggest a policy is qualified, policyholders should next reach out to a broker.
Consultations with life settlement brokers are always free. During these consults, a life settlement broker will help determine the best path forward, even if that path does not financially benefit the brokers or does not include a life settlement at all. These important questions and others must be answered before the policyholder decides to pursue a life settlement.
A qualified broker will ask a variety questions to help determine the likelihood a policy will sell and for what price.
The life settlement process requires 30-90 days to complete. If there is an urgent need for funds, a life settlement may not be the best fit for you.
The qualification and underwriting process involves communication with doctor’s offices, life insurance companies, providers, and all other parties involved. The broker will be responsible for making these calls and all the leg work required to gather the required documents.
Once a life settlement broker has secured all the required paperwork, a policy is then sent to a buy-ready network of life settlement investors that actively bid on the policy. In most cases, this process drives up the price significantly. This process of being “Out To Market” requires 2-4 weeks to complete.
With a life settlement broker financially invested your policy, we may request exclusivity for the duration of this process.
Once the highest offer possible is attained, it’s the policyholder who ultimately makes the final decision to sell or hold the policy.
If the offer is accepted, funds are moved to an escrow account while closing documents are prepared. Closing documents include a transfer of owner and beneficiary to the purchaser.
Once all closing documents are in order, the funds in escrow are released, providing the seller with immediate access to a lump sum payment in full.
Selling a life insurance policy for cash can be a difficult decision with many variables and potential outcomes to be considered on a case-by-case basis. However, there is one question that all seeking a life settlement must answer: “Should I sell my policy to a direct buyer or hire a life settlement broker?”
The answer is not always obvious but the difference is clear:
For example, a recent case of an insured with the following policy:
Offers from direct buyers reached 15% of the face amount or $100,000.00. After reviewing the policy using Windsor’s life settlement calculator, this policy may secure offers between $208,000.00 and $468,000.00 if represented at auction by a life settlement broker.
In this case, an insured who is 85 years old with medical impairments could secure a significantly higher offer by hiring a life settlement broker and allowing some time for an auction and bidding process to drive the offer price up.
However, should a person prefer to accept a lower amount in favor of a shortened process and faster payment, then an offer from a direct buyer would be the correct choice.
The Results: Direct Buyers Offer Less, Save Time, Brokers Get Higher Offers, Require Time.
A direct buyer offers value to the life settlement market by saving the policyholder time. That is no small thing because many people seeking life settlements intend to use their life settlement funds for medical bills or emergency funds. So, when a person sells their life insurance policy for cash to a direct buyer, they bypass the standard 30-90 day life settlement timeframe normally required to sell most policies. Additionally, selling a life insurance policy to a direct buyer means there is no commission owed to a life settlement broker.
A life settlement broker works for you, the seller. A broker’s job is to get the highest possible offer for your policy by presenting the case to as many buyers or investors as possible. This approach of ‘leaving no money on the table’ is what Windsor strives for!
A life settlement broker gathers all the documents needed to bring a life insurance policy to market, where it can welcome bids and offers from multiple interested buyers. This process will typically yield a significantly higher cash offer for a life insurance policy.
Understanding all the options on the table is so important when seeking a life settlement. For some insureds, taking advantage of an Accelerated Death Benefit might be the best option. For other policy-owners, making a decision to go to direct buyers or a life settlement brokers can mean significant cash.
As a broker, Windsor Life Settlements will always obtain the highest possible bid through our ‘auction-type’ bidding process.
Selling a life insurance policy for cash to a third party can be a long process, especially if the policyholder is not represented by a life settlement broker. Additionally, there are many variables that can affect individual settlements including time spent gathering documents, ordering medical records, finding and managing buyers, the auction process etc.
However, the same four key players involved in the process offer a rare constant throughout each case. The insured, the provider (people who buy life insurance policies), the broker, and the life insurance company are each involved in the process, every time..
Of the four parties involved, only one stands to lose money, the life insurance company.
In 2015, it was reported that $112 Billion in Universal Life and Whole Life insurance policies were lapsed by seniors over the age of 65.
Based on 2008 data compiled by publicly available sources, more than 250,000 universal and variable universal policies with a face value of approximately $57 billion were lapsed by seniors over age 65. When term and whole life policies are included, the number of policies exceeds 1.1 million with a face value of $112 billion. If the data were available for 2014, the amount would be even greater.
To better understand how/if all of the parties involved in a life settlement benefit, it’s important to understand how a life settlement works.
A life settlement is a transaction where a third party purchases a life insurance policy from a policy owner, who we’ll refer to as the “insured.” The insured is relieved of making any future premium payments; the new policy owner will assume this responsibility. The policy stays in force, and the death benefit will be paid to the new owner of the policy upon the death of the insured.
An insured is motivated to sell a life insurance policy when unable/unwilling to continue paying premiums and would like to access the cash value of the policy without letting the policy lapse. One of the main reasons this happens is the insured has uses for the money to cover medical bills, fund retirement, travel etc.
After many years of paying premium payments to the insurance company, an insured does not want to see their policy lapse without value. With a permanent type of life insurance policy, or a term insurance policy converted into a permanent plan, there is a build-up of cash value because a portion of each premium payment accumulates inside of the policy. Depending upon the type of policy it is, this cash value grows because of interest it earns or because of positive investment returns.
It’s important to know that life insurance is a legal asset controlled by the policy owner, who has the legal right to keep it or sell it, just as they would with real estate or other assets they own. They have the right to sell the policy to a third party as part of a life settlement for cash consideration.
The insured benefits by having cash on hand to pay for medical expenses, long-term care, or other living expenses with which they need assistance. They gain the peace-of-mind that comes with the lessened financial pressure they face and the ability to meet their financial obligations. It is an economic benefit they have earned after years of paying premiums on their life insurance policy.
The third party that ultimately becomes the new policy owner through the purchase of the life insurance policy benefits in several ways.
Firstly, the provider benefits from knowing that they have provided financial assistance to someone who has monetary needs. They have the satisfaction of providing funds for someone to pay growing medical bills or helping someone receive the long-term care that they have come to need. This can be very fulfilling to the purchaser of the life insurance policy.
Secondly, the buyer of the policy has made a wise financial investment. They have purchased an asset for a fixed sum of money, and they are going to realize a fixed gain at some future point in time. The point in time they’re going to realize the gain is when the insured dies. They will have studied mortality tables and will be able to estimate the life expectancy of the insured and make a reasonable estimate of how long the insured will be alive. This allows them to calculate their rate of return.
A major contributor to the success of the life settlement transaction is the life settlement broker.
The broker is the main point of contact for the policy owner. The broker assumes all of the underwriting responsibilities, including ordering medical records, and preparing a case to go to market. This service alone offers the policyholder considerable value. As with any broker and seller relationship, monetary goals are always aligned, which ensures the best possible price for the policy. Life settlement brokers should also provide information that educates the insured about the life settlement industry and process.
In addition, the life settlement broker is available to answer a myriad of questions from the insured while providing full disclosure about the life settlement process and the impact on the insured.
Finally, the life settlement broker has a network of buy-ready investors which leads to a bidding war for the insured’s policy, typically resulting in higher offers and better results than simply selling a policy to a direct buyer like Coventry Direct.
Of all four parties involved in a life settlement transaction, the insurance company that issued the policy is the only party that does not financially benefit. Life insurance companies make money when a policy lapses. In fact, the majority of life insurance policies issued simply lapse, benefitting only the insurers.
So, in any life settlement transaction, life Insurance companies stand to lose money because they will now have to pay out a death benefit, which they might have avoided. They will ultimately have to meet their promised obligation at the death of the insured. For this reason, life insurance companies resist the sale of a life insurance policy at every turn throughout the process. This is another reason consumers are encouraged to hire a broker whose job it is to move the process along.
Finally, new laws have been passed that require insurance companies to make the life settlement option known and available to the insured/owner.
Life settlement brokers are subject to rules and regulations to ensure honest business transactions. States like California, Illinois, and New York are among some of the first States to regulate how life insurance brokerages operate. Windsor Life Settlements adheres by all State-level and Federal laws in regards to life insurance and life settlements.
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1. Creditors may seize benefits.
For those who owe substantial medical bills and have significant debt, the proceeds from the life settlement can be seized to repay those debts. However, a life settlement can pay medical bills before you get this far behind.
When you took out your life insurance policy you had a specific beneficiary, or beneficiaries, that you wanted to provide money to at the time of your death. A life settlement eliminates the financial benefit realized by beneficiaries. However, the money you receive from the life settlement can be shared with your beneficiaries while you’re alive.
Many people accept life settlements with the expectations that the financial gain will see them through to the end of their lives. This is not always the case. Life expectancy continues to increase, making outliving the proceeds a possibility.
According to the current tax code, the proceeds from life settlements are partially taxed as income. Taxes are assessed using the formula that the total amount of premiums are subtracted from the settlement amount. The overage is taxed at regular income tax rates rather than as capital gains. A tax professional can provide you further guidance on the tax ramifications for you.
A life settlement is a strategy which is used for an individual to sell their life insurance policy to a third party for a sum of money that is greater than the cash surrender value of the policy, but less than the actual death benefit (or face value).
In this event, the purchasing organization will be responsible for all future payments of premiums and receive the death benefit when it is paid out.
Life settlements have proven to be of great benefit to many. The ideal candidate is generally 65 years of age or older and has a life insurance policy that exceeds $100,000 in value. While it doesn’t pay the face value of the policy, it does pay much more than allowing the policy to lapse.
Many retirement plans were depleted during the most recent economic downturn. For those people adversely affected, a life settlement can provide the means for someone to maintain their standard of living and pay for other expenses, such as medical bills.
Providing extra money during retirement is just one benefit of life settlements. As people age, they many no longer see the value of paying life insurance premiums with children grown and having other sources of income for a surviving spouse. Saved premiums can help fund a better lifestyle now, instead of providing unnecessary benefits later.
Individuals that are terminally ill can employ a viatical settlement as a means of supporting themselves when they are unable to work, or to help pay off costly medical expenses. They are fortunate to have paid their premiums and can realize a “living benefit” from their policy.
Life settlements are sometimes misunderstood. One misconception is that they are the same thing as viatical settlements. While there are many similarities, a viatical settlement requires the person selling the policy to be terminally ill and often have a stipulation that their life expectancy be less than two years. This is not the case with life settlements.
Some believe that life settlements have a negative effect on insurance companies and increase the cost of insurance. Life settlements don’t negatively impact premiums because the policy doesn’t lapse. Premiums are still paid until the insured passes away. or the policy is surrendered
Listed below are some of the benefits of a life settlement to help determine if this is a viable option for you. While life settlements aren’t the right financial strategy for everyone, it’s a good idea to understand the benefits and what you have to gain.
Financial setbacks can happen quickly. The need for liquidity is important. A life settlement can be a good source to provide the money needed when a financial crisis occurs.
Life settlements can be designed to provide a monthly income rather than pay out a lump sum. This can help balance a household’s monthly budget, as well as supplement any other sources of income you’re receiving.
When you’re working it can be difficult to find the time to enjoy travel and the finer things life has to offer. Life settlements can provide you the money to enjoy the things that you just didn’t have time for, as well as maintain your standard of living.
Life settlements can help fund needs like hospice care, medical expenses, and expenses incurred while seeking treatment. Some people also utilize life settlements to help fund long-term care needs.
Rather than leave the proceeds of a life insurance policy when you pass away, a life settlement provides you the opportunity to build fond memories while you’re alive.
After a certain age, term life insurance premiums can become exorbitant and unmanageable. This is one reason so many policies lapse each year, without a death benefit being paid after years of premium payments. Life settlements allow you the opportunity to recover some of the money you’ve paid in premiums over the years.
It’s advisable if you’re considering a life settlement that you take the time to determine if this is the right option for you, considering your personal situation. Windsor Life Settlements has the experience to help you make an informed decision. Schedule a no-cost consultation today to get all of the facts and see if a life settlement is right for you.