Who are these Life Settlement Companies?

The investor owned life insurance market (Life Settlement Carriers) is a $30 billion industry. Many of the major settlement companies are institutional investors that have a minimum of $100 million of invested assets being used to purchase and pay the ongoing premiums on life insurance policies. This means that the settlement companies buying your policy are major corporations, not private individuals.

Below is a partial list of well-known companies that are involved directly and/or indirectly in the life settlements market:

What are the benefits of selling my life insurance policy?

Traditionally, a policy was only worth its surrender value if an insured didn't want the coverage any longer. Today, there are investors know as settlement carriers that are in business to buy your policy from you for considerably more than the surrender value depending on the age and health of the insured as well as the costs and benefits of the policy. Essentially, if you have an existing policy that you're thinking about cancelling, you can shop it among these settlement companies and will often find several companies that will pay you a generous portion of your death benefit on the spot, versus cancelling it for oftentimes the much less surrender value. In exchange, that company becomes the beneficiary to the remainder of your policy death benefit when you eventually die. They also take over your premiums so that you are not responsible for any future payments related to the policy.

What's the difference between a Life Settlement Provider and a Life Settlement Broker?

A life settlement provider is the purchaser of the policy (a.k.a. life settlement carrier) while a broker is the representative of the seller of the policy (the seller is generally the insured). The broker presents the policy to one or more settlement providers and may offer market advice to the seller of the policy. The broker's goal should be getting the best deal for the seller. This includes negotiating on behalf of the seller, giving general market advice such as how marketable the policy is and the reputation of various settlement carriers in the industry, fairly presenting the policy to the settlement carriers, transmitting all offers to the seller and helping the seller make an informed decision. Because providers and brokers perform very different roles in the transaction, you will want to ask whether the company you are dealing with is a provider or a broker. In some cases, if you are working with a provider your policy may be presented for an offer from only one settlement company, limiting your potential profits. At WMG, we have direct agreements with over 50 settlement carriers, allowing us to present your policy to a variety of settlement companies (much like brokers) without some of the additional broker fees that are often charged in order to actually sell the policy. Essentially, we are able to cut out the middle-man leaving more of the profits for you.

How much can I expect to receive for selling my policy?

The amount of money you will receive for selling your policy is affected by a number of factors such as your life expectancy, future premiums due on the policy, whether or not there is a loan on the policy, and the market conditions for your policy. We offer a full-disclosure service detailing where your policy will be shopped as well as the gross offers made by each settlement carrier and their financial background. Wealth Management Group never charges a fee for reviewing your policy and you are never under any obligation or pressure from Wealth Management Group to sell your policy.

What is a life expectancy report?

A life expectancy report is a detailed analysis of your life expectancy based on your medical history. There are several well-respected independent life expectancy companies that provide these reports for settlement carriers who are interested in bidding on your policy. The reports provide specific details about insured's health and predict the exact number of years an insured will live based on his or her medical history at the time of the report. These reports are utilized by the settlement carriers to determine how many years the insured will live (in other words, how many years before the policy they are considering buying will “pay off”).

What type and size of policy can be sold?

Most individual and group life insurance policies with a face value of $100,000 or greater can be sold. The policy must not contain a restriction prohibiting transfer of ownership rights and all parties must agree to the transfer of ownership. Also, if the insured does not own the policy, the owner must obtain the insured's written, signed, and notarized consent before selling the policy.

What are the steps involved in selling my policy?

Upon receiving your request to sell your policy, the following steps are taken:

First, a transaction coordinator will be personally assigned to you. Your transaction coordinator will be your guide through the entire process. Your transaction coordinator's first duty will be to explain the process and answer any questions you may have. Then, your transaction coordinator will verify both your medical status and your policy information. During this process, you may be asked to provide additional information which is necessary to properly analyze your policy.

Next, your coordinator will obtain a copy of your medical records which will be used to generate a life expectancy report from an independent life expectancy company. These reports are very specific and indicate the number of years the insured is expected to live based on his or her medical history. Once that report is obtained, it is used to help establish the projected time period that any interested investors will have to wait before a death claim is eventually paid. Following receipt of the report, the coordinator will then order an in-force illustration from the insurance company that issued the policy. The in-force illustration will show the premiums that the prospective investors will need to pay to keep the policy in-force through the insured's anticipated life expectancy. At this point, the information is packaged together and sent to as many as 50 major settlement companies to bid on the policy. Your transaction coordinator will discuss each incoming bid with you in detail. Upon your acceptance of the most attractive bid, your coordinator will work with the insurance company to arrange for the transfer of the policy to the new settlement company. Following the receipt of all required documentation, your settlement proceeds will be disbursed to you or your designee within five business days and the transfer of the policy will be complete.

Am I responsible for my premiums after I sell my policy?

No, the settlement company or institution who buys the rights to your policy is responsible for the payment of the premiums.

What are the tax implications?

There are no specific rulings on the tax treatment of a Life Settlement. The prevailing view is that proceeds are treated as follows:

• Tax free up to the original owner's cost basis (total premiums paid).
• Ordinary income tax to the extent the cash surrender value exceeds the cost basis.
• Long term capital gain treatment on any gain in excess of the cash surrender value.

How long does the process take?

The entire process usually takes between 3 and 6 weeks.

What if I change my mind?

If you change your mind about selling your policy, you can usually cancel the life settlement contract at any time up to the 15th day (varies by state) after you receive the money from the settlement carrier. To cancel the life settlement contract, you will have to return any money the settlement carrier paid to you for the purchase of your policy along with any premiums the settlement carrier paid to keep the policy in force. If you change your mind, remember to arrange with the settlement carrier to have the insurance company transfer the ownership of the policy back to you.

What if I die shortly after selling my policy?

If the insured dies at any time up to the 15th day (varies by state) after you receive the money from the settlement carrier, most contracts will automatically cancel. The settlement carrier will work with you to reverse the sale of the policy. You will have to return any money the settlement carrier paid to you for the purchase of your policy along with any premiums the settlement carrier paid to keep the policy in force. Then your original beneficiaries under the policy will receive the full policy proceeds from the insurance company.

Our Promise To You

We understand that selling your life insurance policy is an important financial decision. WMG works with you, your financial, legal, and insurance advisors to help you make the best decision to meet your financial goals. WMG respects your privacy and is dedicated to keeping its promise of confidentiality.