We often receive calls from seniors who are conducting online research regarding life settlements. One of the most common inquiries we receive comes from seniors seeking a clearer understanding of the life settlement transaction process.
The information below is designed to answer any questions you might have, but please feel free to call us with your questions. At Trust Life Settlements, our goal is to broaden awareness of life settlements as an effective, and in many cases the preferred, option for unwanted life insurance policies. If you are interested in selling your policy, we are happy to answer your questions and walk you through the process.
First, it’s important for policy sellers to understand that, depending on the situation, life settlement transactions can be complicated and require the involvement of some entities. In situations where a life insurance policy is about to lapse, or an annual premium payment is due, the normal processing methods may need to be adjusted to keep the policy in force while you weigh your options or while your application is in the processing stages.
In a typical life settlement transaction, the steps below can take anywhere from three to six months.
Step 1 | Research: Policy owners or family members should invest time exploring all the options for an unwanted life insurance policy.
Step 2 | Pre-Qualification & Pricing Analysis: As part of the research phase, some policy owners will request that a life settlement company evaluate their eligibility for a life settlement based on information exchanged during a short telephone conversation. The life settlement company can also provide a ball-park quote or pre-pricing analysis on how much the policy would be worth in the secondary market. This value is based on some factors, including premium expenses, death benefit, the rating of the insurance carrier, and the insured’s age and life expectancy. This is one of the services provided by Trust Life Settlements, and we encourage seniors to take advantage of this free option.
Step 2 | Decision Time: At this point, the policy seller decides whether to move forward. The decision-making stage should include an analysis of whether the original purpose of purchasing life insurance continues to exist. If you decide you no longer need the insurance coverage, you will want to take action as continuing to pay expensive annual premiums may be draining valuable cash assets from your estate or retirement savings.
Step 3 | Professional Representation: Selling your insurance policy is similar to selling any personal property, such as real estate or stocks. That’s why you’ll want to work with an experienced life settlement advisor to guide you through the application process, facilitate the brokering stage, and represent you throughout the entire transaction. Trust Life Settlements and its brokerage partners have represented many policy sellers, and we will be happy to assist you.
Step 4 | Application & Documentation: After choosing professional representation to broker a policy, the policy owner must complete an application. This step requires the seller to gather various documents, including all information about the policy, information regarding the seller’s physicians and medical records for underwriting, and other information relating to the insured’s age, loans on the policy, etc.
Step 5 | Underwriting & Life Expectancy Estimate: During this step in the process, companies that specialize in the actuarial analysis are brought in to determine the insured’s expected longevity. The life settlement broker will typically purchase two reports from these actuarial experts which are calculations of the probable life expectancy using actuarial and physician experts.
Step 6 | Secondary Market Brokering Stage: The life settlement broker shops the policy to multiple institutional funders known as providers. These providers evaluate the policy’s suitability based on their purchasing guidelines and determine whether the policy is a match for their funding parameters. At this point, the providers may determine that the settlement does not qualify for purchase and the process ends.
Step 7 | Purchasing Offers Extended: For policies that meet the purchasing criteria, each provider will extend an offer to the broker representing the policy owner. The broker will continue to shop the policy and seek competing offers from other providers. Once the competitive bidding process comes to a close, the broker provides the policy owner with the highest offer received, and the senior decides whether to accept or decline.
Step 8 | Closing Package: Once the policy owner accepts an offer, the provider that made the offer will prepare a purchase and sale agreement for review and signature by the policy owner and beneficiaries.
Step 9 | Insurance Carrier is Notified. The insurance carrier is notified that the provider is now the new owner/beneficiary of the policy. The provider assumes responsibility for all future premium payments and collects the death benefit when the insured dies.
Step 10 | Funds Transfer: Upon written verification of the change of ownership and beneficiary, the escrow agent releases the settlement payment to the seller of the policy.
If you would like to discuss the life settlement process or would like to determine your eligibility for a settlement, feel free to contact us at 800-216-2513.