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What is a Life Settlement? Simply put a Life Settlement is where a Life Insurance policy owner sells a current policy to an institutional investor for up to four times its cash surrender value (CSV).

Who has benefited? The following case studies illustrate how Life Settlements create additional wealth for policy owners over surrender value.

  • Universal Life Death Benefit; $5,000,000
    Cash Surrender Value: $530,000
    Highest Offer: $1,350,000
    (A 155% increase over the surrender value)
  • Survivorship Universal Life Death Benefit; $5,000,000
    Cash Surrender Value: $150,000
    Highest Offer: $360,000
    (A 140% increase over the surrender value)
  • Survivorship Universal Life Death Benefit; $13,200,000
    Cash Surrender Value: $893,000
    Highest Offer: $3,900,000
    (A 337% increase over the surrender value)

Why would you do a Life Settlement? Some reasons include prohibitive premium costs, under performing policies that require additional premium to support its death benefit, Lower estate tax burdens and any reason that would create a situation where you would surrender your policy.

Why use our services? Our team of licensed insurance professionals understand the Life Settlement marketplace and how to maximize client offers. We have created the largest network of institutional investors who bid against each other, similar to an auction process, thus ensuring you the highest possible offer. Our innovative market place has created a fluid secondary market for Life Insurance where one did not exist previously. We are so confident in our abilities that our clients never pay any fees before, during or after the Life Settlement.

IDEAL CANDIDATES

Candidates for life settlement include anyone over the age of sixty-five (69) who has an in-force insurance policy with a minimum face amount of one hundred thousand dollars, ($100,000.00) and needs immediate cash from the sale of his/her insurance policy which he/she has owned for at least two (2) consecutive years. Further, the life insurance policy must be issued from a carrier rated A or better by AM Best.

Owners of almost every type of insurance policy are eligible to have their insurance policy settled.

Also, rather than just selling unwanted, obsolete, or unneeded life insurance policies, an insured may elect to use the sale proceeds to purchase coverage with lower premiums or no premiums at all.

WHY SELL A POLICY

There are many reasons why a life settlement makes sound financial sense. This includes (but is not limited to):

  1. The policy's premium cost becomes prohibitive;
  2. The policy's performance has not met original projections and the policy may require additional premium to support its death benefit;
  3. An insured's estate has been reduced in size and thus one's tax burden gets reduced. In those instances where an insurance policy was purchased to fund the estate's tax obligation and now is no longer needed, rather than just letting it lapse or surrendering it for its CSV, it can be settled for far more dollars. (Bear in mind that tax reform legislation is being proposed to repeal the current federal estate tax.);
  4. A primary beneficiary named in an insured's policy predeceases the insured and thus the policy is no longer needed;
  5. The policy owner is now divorced and the beneficiary was his/her spouse;
  6. The policy owner is now bankrupt and can no longer afford the policy;
  7. A corporate or business buy-sell agreement was put in place and one of the partners has died or moved on to another company, or the company has ceased to operate;
  8. The retirement of a key executive who no longer is a managing partner in the firm that insured his or her life;
  9. Level term polices in which the term is expiring; and
  10. The term costs have increased beyond affordability.

We know that settling one's insurance policy is a wise choice. Life insurance settlements have gained wide acceptance in the financial community in the past few years and tens of thousand policies have already been sold via this device.

THE PROCESS

An insured who meets the conditions and qualifications for settlement of their policy will be provided an application for settlement, along with a medical authorization and disclosure form. After completing and signing these forms our staff will check the forms for accuracy. Once everything is in order, the insured’s medical authorization and release form will be sent to all of the insured’s physicians and hospitals of record. When the insured’s medical records are returned, they will be packaged for submission to several life settlement funding companies (Investors).

The life settlement package will be submitted to only those funding companies selected by our office. The choice is based on a careful analysis and evaluation of both the insurance policy and medical condition of the insured, as each funding company has its own set of criteria. This precludes wasting time contacting a company with no interest in making an offer for the purchase of an insured’s policy. Our superior underwriting staff make it their business to know the underwriting criteria of each and every funding company it has a master general agent contract with.

Each funding company will in return make an offer to purchase, and we may make some counteroffers through the negotiation process. All offers we receive will be presented to the insured for his/her acceptance or rejection. In short, it is generally true that the longer the insured’s life expectancy, the lower the offer, because the cost of maintaining the policy in full force and effect until the insured’s date of death is significantly higher. The age and medical condition of the insured plays the most significant part in determining the offer price for the purchase of an insurance policy.

WHO IS INVOLVED

The following are the typical parties to each life settlement transaction:

THE POLICY OWNER: The policy owner quite frequently is the insured. However, that is not always the case. Often the policy owner, rather than being the insured himself, is a family trust, life insurance trust, charitable organization, or a business.

Jack Mowers and his associates: Through his licensed life insurance agents is responsible for speaking with the insured in order to answer his/her questions about the life settlement process and to assist him/her in filling out all of the requisite questionnaires, applications, and authorization forms. We receive the insured’s forms, obtain all medical records, analyze an insured’s insurance coverage, package the whole life settlement case, and submit the case to several funding companies for offers.

FUNDING COMPANY: The funding companies are companies responsible for actually purchasing an insured’s life insurance policy at a discount of its face value, procuring the purchase funds from several sources, including hedge funds, pension funds, insurance companies, and accredited investors, to name a few.

SELLER EXPECTATIONS

A prospective seller of his or her insurance policy can expect complete anonymity when contracting with our office. We guarantee to keep all an insured's personal and medical information obtained through the settlement process in the strictest confidentiality. In addition, all insureds utilizing our services can expect no fees of any type whatsoever, with a guarantee that their settlement package will be professionally prepared and marketed to several funding companies so as to find the highest offer for their policy. Our goal is to generate strong competition for the purchase of an insured's policy to assure that the highest offer will be forthcoming.

A Policy Owner wanting to sell his/her policy, rather than having it lapse or surrendering it for far less than the fair market value, will realize the following benefits upon settling the policy instead:

  • Relief from the burden of making monthly, quarterly or annual premium payments due under the policy;
  • Additional funds readily available to supplement your other income;
  • Far greater financial benefits that far exceed any other option or alternative;
  • Funds for medical treatment, to use for your comfort, to take a long- needed vacation;
  • Realizing a profit from a non-performing asset.
  • Funds at your disposal for a "rainy day".

There is absolutely no benefit to an insured in receiving only one offer from a life settlement funder. Our team of highly trained insurance and medical underwriters will assure that a seller receives offers from multiple life settlement funding companies. Naturally, when life settlement funding companies know that a single application from an insured is going to be submitted by us to multiple funding companies, their offers tend to be far more competitive, and the best possible offer can be generated for the policy owner.

FINANCIAL CONSEQUENCES

First and foremost, we do not provide any tax advice. The taxation of the proceeds an owner receives in a life settlement transaction may vary from state to state. An insured contemplating selling his or her life insurance policy at a discount from the face value of the policy should always seek advice and counsel from a professional tax advisor. Each life settlement case may be treated differently by state revenue officers or the IRS.

Often life settlement transactions are treated as capital gains, taxing the gain made between the settlement amount and the cost basis of the policy. However, if the CSV is higher than the cost basis, that difference may be treated as ordinary income and taxed higher according to an insured/owner’s particular tax bracket.

A note of caution: receipt of income under a life settlement transaction may affect any public assistance program an insured may be participating in at the time of the sale of his/her policy, such as Medicaid, Aid to Families with Dependent Children, and Supplemental SSI. An insured should always be diligent about checking with the appropriate social services agency. Furthermore, proceeds from the sale of a policy may be subject to attachment to the claims of an insured’s creditors.

Life Settlement Application

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