Understand Your Right to a Life Settlement

Are you aware that you have a right to sell your life insurance policy?  It can be sold like any other asset.  In 1911, the U.S. Supreme Court, in the case of Grisby vs. Russell, ruled that life insurance policy owners may transfer ownership of their policy to a third party.  That third party does not have to be related to or hold an insurable interest in the original policy owner or insured.

In that particular case, a patient needed surgery, but could not afford it.  The patient agreed to sell his life insurance policy to his doctor in exchange for $100 to pay for the surgery.  The doctor then paid the premiums up until the time of the insured’s death and it was ruled that the doctor did have a right to the death benefit of the policy.

Selling his policy obviously benefited the insured as he was then able to afford a needed surgery.  Why is it that so few consumers are aware of this valuable option?

-Policy owners often receive no benefits from their life insurance policies as it is estimated that 90% of life insurance policies lapse, rather than ever paying out a death benefit.

-Many agents are prohibited from sharing the option of a life settlement with their clients, but why?

Insurance companies make money by collecting premium payments.  Of course, a lot of these funds are paid back out in the form of a death benefit, but what if someone can no longer afford to pay their premium payments?  What if they forget to make a payment?  In those cases, the policy will lapse, and the insurance company no longer needs to pay out that benefit.  For years, the insurance company has been collecting premiums.  The policy owner now has nothing to show for all of those payments, but the insurance company has made a very nice profit.  When you consider their bottom line, of course, they would not want their agents to offer this valuable alternative to letting your policy lapse.

What is a Life Settlement?

It is your right to sell your life insurance policy through a life settlement or a viatical settlement.  Both are the sale of your policy for more than the cash surrender value and less than the death benefit, or policy face value.

In a life settlement, the insured is typically age 65 or older with one or multiple health impairments.  If you are in excellent health, regardless of age, you are unlikely to qualify.

In a viatical settlement, the insured typically has a terminal illness and is not expected to live longer than two years.

An investor will make a cash offer and agree to take over premium payments in exchange for the rights to the policy’s death benefit.  Life expectancy is the most important component in determining your policy’s value.  The lower the premiums and the shorter the expected lifespan, the higher the offer will be.  This is because the new owner must consider future expenses of keeping the policy in force.  Lower expenses over a shorter period of time mean that the policy has a much higher investment value and will yield a higher offer for you.

Sell Your Life Insurance

If your policy is no longer needed, your premiums are not affordable, or if you just need money for expenses, you can sell your policy.  When you are facing health issues, the last thing you want to have to worry about is finances.  A life settlement can be a very valuable option.

Life settlement companies will work with you to get you the best offer for your policy.  It will always be more than the cash surrender value and less than the death benefit.  You can even choose to retain a portion of your policy.  One may choose to do this in order to provide funds for final expenses.

If you decide that you want to sell your policy, you will complete an application including insurance and medical information release forms.  The life settlement company will then gather and review medical records and policy illustrations in order to determine eligibility for a sale.  If your policy qualifies, they will match it with the appropriate buyer.  The buyer’s offer is then presented to you and if accepted, you will receive a closing package for review and signatures.  Once policy ownership is changed to the buyer, funds will be transferred directly to you.

You don’t have to disclose what you plan to do with the funds you receive; what you do with them is completely up to you.  Funds could be used to cover medical costs beyond what insurance covers, pay for home health care, pay for assisted living, or you may choose to use them for that vacation you’ve always wanted to take.  In addition to the cash offer you receive, you will also be saving a significant amount of money by no longer having to pay premiums.

Remember, you have a right to sell your life insurance policy.  Don’t allow your policy to lapse and miss out on funds that could have helped you to live your life to the fullest when it matters most.