Life settlement as a part of retirement:

A life settlement refers to the sale of a life insurance policy to a third party before its maturity date for an amount that is lower than the face value but much more than its surrender cash value. Such third party can benefit from the purchase by collecting the death benefit paid out. Such sale is possible only where the life of one or more individuals covered by such policy is ascertainable and limited. Typically, an insurer must fulfill the following conditions to be eligible for a life settlement:

Ø       The policy amount is above $50,000.

Ø       The policy has been in force for a minimum of two years.

Ø       The policy has a low cash surrender value.

Ø       The policy premium is less than 8% per annum.

Ø       The policy holder’s age is 70 and above.

A life settlement is a complex financial transaction and hence it would be in your best interest to entrust such jobs to experienced professional advisors. The life expectancy providers are specialized independent companies that will issue your life expectancy report and this determines how much you can get as life settlement. Also most types of life insurance policies can be settled like Universal, Variable Universal, Survivorship, Convertible, Whole Life and even Key-Person policies.

The secondary market for life settlement is relatively new and that is why not many are familiar with the term. Though this concept had remained in the market for than 100 years, very few were aware of ways to make use of this hidden treasure during their own lifetime. The offers you will receive for such settlements will vary and hence to get the best price possible you need to get a pool of interested buyers for your policy. It would be a good idea to involve a broker for such a need.

The benefit of upfront cash:

Life settlement solution provides you with the best value for your policy before its maturity without any hassles like marketing, haggling, or other expenses involved. The policy holders receive discounted, upfront, lump-sum cash as payment in return for such sale of their life insurance policies before the date of maturity. The benefit of such immediate cash payment is important for people especially in their post retirement days since they are able to enjoy such money they saved during their own lifetime.

Structuring the transaction:

The insurance holder assigns such policy to a trust that pays premium to the insurance company to avail death benefits from them. Such trust then pays fees to the settlement agency for an equity payment and then sells such coupons and principal to the investor in return for an investment outlay. Finally, the trust makes the cash settlement to the policy holder. This is one popular ways used to structure the life settlement deal transactions.

What are senior settlements?

A senior settlement is the sale of an insurance policy by a senior to an investor for a percentage of the insurance amount. Where earlier one had to wait for the policy to lapse or accept a lower cash surrender value on selling off such insurance policy before its maturity date, the senior settlement allows you to sell off your policy at a value much higher than such surrender value. Following are the clauses you need to satisfy to qualify for senior settlements:

Ø       The insured has a limited life expectancy of less than 15 years.

Ø       The policy holder must be at least 65 years old.

Ø       There are no existing liens on such life insurance policy.

Ø       The life insurance policy is worth at least $100,000 or more.

Ø       The coverage has been in force for at least 2 years.

Under this scheme, a senior can sell his or her policy to a third party, who then becomes liable for all future payments and premiums on that policy. The senior citizen gets a lump sum in return for such sale of insurance policy. This is a very important tool to help them free up cash investments in such long term life insurance policies.

How are they different from Life Settlements?

Though life settlements are as good as the senior settlements, such an additional option provides the seniors with an option to settle their policies at a much higher value once they are over 65 years old. The difference between such settlements is the life expectancy involved which is limited in case of a senior settlement.

Origin of concept:

With inflation on the rise, the seniors started to realize that they might not have saved enough for their post-retirement days and this is how the senior settlement process came into being. It helped them to maintain their same style of living by using such provisions for the rest of their journey ahead.

Though seniors have other options like going for a reverse mortgage, using their own savings or even availing the aid of their relatives and friends, still senior settlement provides them an excellent way to gain access to their own funds during their lifetime.

This type of a plan is always beneficial for the insurance companies as well as the investors and policyholders as it serves the purpose of all the people concerned. While selling a policy like this, the documentation of the proposal is made with great care as all the terms and conditions of the policy is written clearly. The documentation of the policy accepts and allows the possibility of change of ownership later on. This is the most important aspect of a policy like this. It is also mentioned in this policy documentation that the person would get the whole amount on the date of maturity or on the death of the policyholder, whichever comes first.

This policy also allows the policyholder to sell the policy to the third party if he needs some instant cash ever in his life to meet any emergency expenditure. If the policy owner were suffering from any severe disease, like cancer, AIDS, and/ or kidney failure, then he would sell the policy to anybody who would show some interest towards his policy. This deal allows him to sell the policy in lieu of a large cum of money. However, interest of all the parties remains intact in this policy.

Life income with certain period

This unique scheme of the policy is another specialty of the said policy. It allows you to get the income in 10 years certain, 15 years certain or, 20 years certain etc. If you die in the first year itself, then your successors would get the income in full during the next 9 years, 14 years, and/ or 19 years etc. It works as a great financial support for the family of the deceased policyholder.

This facility helps the wife or the child of a person who dies prematurely after consuming the financial benefit for one year only. The wife and the child can enjoy full financial income for the next few years as applicable in the policy. It comes to them as a big economic support.   

Life income with no certain period

This type of a declaration in the documentation of the policy would bring you a big income only during the years you are alive. This income stops with your death. Obviously, this option makes you available the largest possible life income, which certainly helps you in a big way. If you are unmarried and have nobody to depend upon you or your income, then you can avail this option because it brings you the largest possible income for you.

Join and last survivor

This facility is available to you or your nominee if you use this facility against your policy. If you are the policyholder or the investor, then you can get the maximum benefit out of it, however, after your death, the last survivor can also avail the financial benefits. The last survivor or the second beneficiary can get the same sum as compensation or he may also get a reduced amount, as opted for by you in the deal mentioned in the documentation.  However, this income would stop after the death of the second nominee as nobody would be left there as a legal claimant.

For example, if a husband dies after availing the financial income for a few years, and then his wife, who is declared as the last survivor, can get the financial help until she dies. However, after her death, nobody would be the claimant, as per the documentation of the policy papers.

Interest income

This facility works as a great boon for the dependant of the insured person. If a person, the actual policyholder, dies then, according to this facility, the whole income of the deceased person would lie in tact with the insurance company. The company would now pay the wife of the person, as the living beneficiary, according to the option she chooses. The company can pay in monthly or annually, as opted for by the last survivor.

This income plan is very much helpful at times when the last survivor is totally dependant upon the policyholder. However, the most important part of this service is that the beneficiaries of the last survivor can also get the same service from the insurance company. This facility really works like a boon for the families like this.  

Fixed period income option:

The policyholder is free to make this option in the documentation of his deal. He can opt his benefit to be paid to him over a period of 10 years. The company is bound to pay the investor the amount due to him during the next 10 years in any mode as chosen by the policyholder. He can get the payment in monthly, quarterly, semi-annually, or even annually.

It is found that the person gets more help in this manner as against his payment in any other mode. A person who makes a very good planning to get the maximum benefit from these life settlement plans always avails this option for getting the payment.  

Fixed amount

This option allows the policyholder to determine his own income as per his wish and plan. He can declare to get his own amount as per the amount of his policy. If he declares that he wishes to get $1000 as his fixed monthly income, then the company is supposed to make him that payment every month until his plan of income comes to an end. This amount is determined by adding the interest with the amount insured.  

How to choose?

Obviously, the policyholder is to take this decision. He should make a market research, talk to the agents and brokers, and take the advice of the estate managers before making any final decision of buying a policy like that.    

What are Viatical Settlements?

The sale of a life insurance policy by the policy owner prior to the maturity of the policy is known as Viatical Settlements. You need not worry about the amount being deducted off the settlement value for its pre-maturity reasons since the discounted value though less than the face value of the policy, will always be in excess of the premiums paid so far or the current cash surrender value.

The main objective of people using such viatical settlements is to get immediate cash for their requirements. The most common cases where such settlements maybe preferred are for the severally ill patients who find it hard to keep paying the high health insurance premiums. For them, this is in fact a good way to get some handy cash as well for their treatment needs.

How are they different from life settlements?

The reason why such policies are used is the major difference between a life settlement and a viatical settlement. While a viatical settlement involves those cases where the insured person is suffering from some terminal, chronic, life-threatening or catastrophic diseases and life settlements refers to the sale of life insurance policies of people over the age of 65 years whose health is of no issue while making such settlements. Usually the viatical settlement providers will buy your insurance only if your life expectancy is twenty-four months or below.

Other terms related to Viatical Settlements:

‘Life expectancy’ refers to an estimate of the number of months or years a given individual is expected to live based upon the evaluation of their gender, age, family lifestyle and medical history. ‘Viatical’ refers to a Latin term “via tecum” which means making provisions for a journey. A ‘Viatical investment’ refers to an investment instrument created through the sale of a life insurance policy in exchange for a cash payment less than its death benefit.

This accelerated death benefit option may be seen as a morbid affair by some. However, the fact that such benefit comes into the hands of the insured during his or her lifetime is what makes this policy one of the most valuable personal finance tools for the ailing community. The benefit of ready cash from such settlements cannot be denied and such upfront cash has helped such ailing people to meet their needs on time.

Life settlement process and industry in Europe:

The Europeans are immensely benefited by these insurance and life settlement plans. The policyholders can sell their policy whenever they need some extra cash to meet some unorganized expenses. This industry has been trusted by the investors as they find a great financial support in them. Another reason for the popularity of these life settlement plans is that the grown up people get the cash almost immediately. This plan also helps the investors and their family-members when the actual policyholder passes away. Due to these invariable benefits, these life settlement plans have been very popular these days. Since the payment is always made in cash, therefore, no question of doubt arises in the genuity of the policies. 

Industry bodies in Europe

The dependability of the life settlement cases has increased over the years because of the active participation of different bodies in the functioning. The responsibilities of the deal are carried out by Agents/Brokers, Charities, Attorneys, Estate Planners, CPA’s, and Estate Planners. The companies like Advanced Settlements, Inc. have enormous success and reputation in the business. Their success largely depends upon these financial professionals who carry out all the functions of the deals. The involvement of so many skilled people has paved the way of success for many other companies. These companies also provide true market support that is based upon true market research.  

Life settlement market size and growth in Europe:

It is worth mentioning that the market size of life settlement cases has grown considerably in the last few years. Started in the year 2001, the life settlement plans have touched magical figures in just 10 years. By the end of the year 2006, it touched the landmark of $6.1 billion. It is expected that latest market research will show even higher status of remarkable achievement. This study growth rate has been registered because of tremendous market research and hard work on behalf of all the components of the deals.       

Now the question comes, is life settlement a part of financial planning? Then the answer is yes. An owner of insurance policy who has being paying his/her premiums for the last many years is now not able to pay the premium any more. Now these people need the cash as he/she may have some of their personal and financial needs. Even the amount which they receive from the settlement is utilized in other investments too. This life settlement helps in various fields like the estate planning, recovery from the bankruptcy, trust administrations and many more.

If you want to invest in other investment options as well, the life settlements help a lot.  As the fund which you will receive from this life settlement can be used for investing in other investment products. So if you want to double your money then use the fund which you have received from life settlement and invest them in other investment products. Also, you can put this fund in your bank and can gain its interest for the rest of your life. Even you can use this fund for your personal expenses too. So you can see how you can use this fund in solving your various financial problems. So we can surely say that life settlement helps to plan your financial aspects and planning.

How can life settlement benefit a retiree?

The life settlement fund helps in your retirement planning also. If you are worried about your life after retirement then forget all your tensions as you can use the life settlement fund as a security after your retirement. You can go and get the fund immediately and use it for your needs. After you are retired you do not need to be dependent on anyone as this fund will help you to fulfill all your basic needs. If you want your loved ones to stay happy and to live comfortably after your death then also this life settlement policy will help you to get all the cash. And in return you can fix the cash for your family. Even though you won’t be with them but your best wishes and your financial back up will help them to survive in a comfortable way.

Why you need to consult Professionals before entering into life settlement?

You need to consult a professional advisor before entering into a life settlement because the market is very much fluctuating so it is not possible for any one to have the full knowledge about the market. If you are planning to sell your policy then surely the reason will be to get a good amount as settlement. But as the market is highly competitive so the third party whom you want to sell the policy might cheat you and give you a smaller amount as settlement. So in order to avoid this situation you need to consult the life settlement companies and the advisors. They will not only guide you but also will provide you all detailed information related to life settlement. Even they will help you in the negotiation and finally will help you to gain a good amount as the settlement.

Disadvantages of life settlement

With some of the best advantages, there are some disadvantages also associated with the life settlements. Firstly, the basic disadvantage is the fact that while you are in a life settlement you might get in the trap of a false life settlement company. It might cheat you and you will have to face a huge loss. So you must be aware of these false companies.

Next disadvantage is if the senior citizen has got their beneficiaries then in order to make their future secure, the senior citizen should avoid this life settlement and keep on paying the high premiums even though they are not financially sound.

Through the point of view of the insurance company of life settlements, due to life settlement system they have to face a huge loss as there is no “lapse”.

A life settlement is s transaction where a policyholder sells the policy they own to a third party for an upfront cash lump sum. A life settlement transaction usually comes about because of the value generated from paying premiums for a long period. But after a certain point of time due to some reason this person decides to sell the polcy to another person whom we consider the third party.

Now here the third party will pay an amount which will be less than the face value of the actual insurance policy. And thus by paying this amount the third party becomes the owner of the policy, this is known as the life settlement technique. Now if you think from the perspective of the third party then you can see how this third party gains a profit by this life settlement system.

Here when the third party gains the ownership he gains a lot of profit once the insured person dies. If the insured person dies early then the money amount will be high too. Generally to gain the benefit of the death the amount is paid off, here the third party gains more amount than that.  Now if you are thinking that why somebody will sell the life insurance policy then the reason can be plenty. Firstly if the policy owner is not in a position to pay the premium and wants to use this money in other investment options then he might sell his policies.

Even for personal reasons too, the owner sells his policy to a third party. Here during the selling of these life insurance policies in the life settlement cases, the companies which deal with life settlement cases play a vital role in guiding the clients. And also in getting them the right amount and maintaining all the rules.

How can you qualify for life settlements?

It is not easy to qualify for the life settlements cases, as there are certain rules rather certain guidelines which you need to follow to get a life settlement policy for yourself.

Firstly you have to be a senior citizen to get a life settlement policy for yourself. You have to be 60 years or above and then only you can sell your policy.

Secondly this senior citizen must have a life insurance policy covering an amount more than $100,000 or above. If you are having a policy more than $100,000 then only you can go for the life settlement system. This is because in the life settlement system itself you can earn a lot rather than surrendering your policy cash value.

In this kind of settlement, if you are a policy owner and of 70 years or above and facing a lot of health problems then the settlement amount will quite high. So if in your family you have done insurance for your grandmother who is over 65 years and has severe health problems and you already have a policy coverage which is more then $100,000 then go for the settlement system rather than the surrendering.

Now before you actually go for the life settlement policies there are certain aspects which you have to keep in your mind.

There are some of the factors that will affect your life settlement system and those are.

Age and sex- In case of age the owner of the policy must be above 60 years and not less than that. But incase if the owner of the policy has a life span of not more than 15 years due to any disease, then he or she can go for the life settlement cases. So if you are a senior citizen, whether male or female as here gender is not an obligation, then you can opt for the life settlement policies. This will in turn fetch you a big amount, lesser than the face value of the policy but more than the surrendered value.

Medical condition- The owner of the insurance policy must have such a health condition that he is just able to do his daily work. As this settlement is done by the senior citizens so you can judge their health condition, in these cases the owner of the policy is not expected to live more than just couple of years. If the owner of the insurance policy has got a health condition which is getting complicated day by day then the settlement amount will be high. The worse the health and medical condition, the more will be the settlement.

Policy type- Mostly all types of life insurance can be taken into the life settlement cases. Some of the insurance policies like the whole life, adjustable life, variable life, universal, survivorship and term (convertible) are some of the insurance policies which actually qualify for the life settlements.

Current surrender value of policy- The current surrendered value should always be lower than the face value.

Current premium of policy- The current premium of policy must be 8 % per annum or less. The premium rate must not be more than 8%.

Life settlement plans are meant for the benefit of the common consumers. It is especially very beneficial for the grown up people who are in the age group of 65-70 years. These plans are derived for them to meet any emergency expenses that occur all of a sudden. It may be related to their immediate medical attention or any other expense of this nature. For those people, their life insurance policy may solve all their problems in just a while. The process of life settlements is designed in such a manner that they can help you to overcome your emergency expenditures without much worries or tension.

Life settlement process and industry:

Actually, these life settlement plans are common life insurance plans that are drafted in a different way. These plans do not bring much return for you, as the premium amount is also less than common life insurance plans. The life insurance regulatory boards and government laws support these plans right from the moment they are purchased by the policyholders. The insurance companies play a vital role in the whole story, as they are the authorities to handle all the proceedings right from its beginning. They allow and help you to sell your life insurance policy to a third party who shows interest in your policy. You can also sell your policy to the secondary market for a cash down payment. The sale of the life settlement plans and policies can bring you a huge sum of money that you can use to meet the unorganized expenditure.   

Life settlement industry bodies:

The life settlement industry is well organized into different units and all the units work in a mechanical way to bring about the natural outcome for which it is designed. Naturally, the success of this industry entirely depends upon these fractions. To be very accurate in the assessment, all these fractions work in close cooperation with each other and can bring about the desired outcome only in close association with each other. These small, yet important fractions include Estate planners, Real estate Agents, Charities, Estate Planners, CPA’s and Agents/ Brokers. The role of the attorneys, also, is very important as they protect the insured people from ant harassments. 

Before you invest into these life settlement plans, you must make a market research considering all aspects of the life settlement industry. You must keep yourself in close contact with the life settlement agents and brokers, as they are the people who can give you the right proposal that would suit your needs and requirements. To ensure no loss for you in the purchase and sale of these life settlement policies, the role of these agents and brokers is very vital. However, before investing into any such policy, you must keep a close look at the market situation after the economic downfall. 

Aim and purpose of industry bodies and associations

Different associations and bodies related to the industry always work for the benefit of the consumers as well as the company. It is possible to take care of the both the sides here. The policyholders pay a big sum of money to the concerned life insurance companies after the life settlement policy is sold to the third party. On the other hand, the life policyholders also get a huge sum of money after the reselling deal is finalized. This part of the proceeding is very dependable and free from any dispute as the money is paid in cash. Besides, the interest of the third party also remains safe as he also gets his share without any problems. However, the whole amount that is transacted in the deal is fully taxable and all the people related with the sale and purchase of the life settlement policy need to pay the taxes at their own levels.     

Summary of state laws and regulations

All the proceedings of the life settlements are well protected by the law of the land. A convention was held in Chicago on October 25, 2007, which was attended by the leading industry research teams, life insurance experts, Estate planners, and highly professional groups. Some of the participants belonged to Association for Advanced Life Underwriting (AALU), National Institute of Insurance and Financial Advisors (NAIFA), and Life Settlement Institute (LAI) etc. The conference was in favour of improving the services of the life settlement plans and policies more flexible and dependable So that the possible investors and the policyholders could rely upon them. 

Consumer protection and complaints

All the life settlement plans and policies are well protected against any violation and are the rights of the investors are not at stake. The consumer protection cell of the insurance regulatory boards is responsible for safeguarding the interest of the investors.

Role of this life settlements company

The basic role of these life settlements companies is firstly to provide proper advice to all the senior citizens who are looking forward to the life settlements. The senior citizens might not be aware of the terms and conditions and techniques of these life settlements transactions. So these companies give them the proper guidance so that they get all the knowledge.

Secondly, during the process of the negotiation these companies help them while negotiating. Here, these companies behave just like a lawyer so that you can get the best amount as the settlement.

Thirdly, on every transaction these companies give their best advice to reduce any errors.

Fourthly these companies also will guide you with all the major marketing help and support. Let it be any marketing information or marketing help, these companies are all here to support you.

List the life settlement companies

Some of the names of the best life settlement companies are as follows:

Welcome fund Inc

ProFinancial group Inc

Life assets group

And many more are there in the list. All of these companies have been set up for providing the full help to all the senior citizens. You can get names of many other companies related to life settlements on various websites. However on the websites you will find all kind of companies, some are really trustable while the others are false and cheaters. So always be alert while you choose your life settlement company.

How do life settlement companies make money?

The basic work of these settlement companies is to take the life insurance policies from the senior citizens and then they search for the potential buyers. Now the questions comes how do these companies earn? Well they charge a certain commission on the face value of the insurance policy to their clients. This is how these companies work. The more the face value of the insurance the more will the company earn.

Who regulates life settlement companies? 

The life settlement companies are regulated by the New York law. The interest of the consumers is protected by the New York law only. As there are many companies who promise to be trustable life settlement companies, but unfortunately many of them are cheaters. So the New York law has issued various laws to protect the interest of the senior citizens from these cheaters.

The New York Life settlement companies and plans have been largely modified recently to make them more acceptable and genuine for the policyholder’s point of view. These plans and policies have been made more flexible, confidential, and private in their nature. These policies are now more acceptable to the customers and they feel more confident about them. More modification proposals are supposed to be brought in to make these settlement plans and policies more and more acceptable and dependable. The efforts are also on to make these settlement plans better and more flexible for the grown up and old people.

List of life settlement providers in New York      

In New York, there exist a number of life settlement companies and brokers who are providing life settlement benefits to the people all over the place. The role of these companies and brokers has been very satisfactory as well. The available records show that these policies have become popular among the investors. The companies have shown satisfactory trends in settling down the claims of life cover by paying the policyholders their share in the deal. Today, the turnover in the industry has crossed multi-million-marks as well. The involvement of the Attorneys and the government officials in the regulatory boards has increased the dependency level of the policyholders or investors.

The Anthem BlueCross BlueShield Health and Medical Insurance Inc, Rocky Mountain Hospital and Medical Services, Anthems Health Plans of Kentucky Inc are some of the leading life settlement companies that are making good business over the last few years. They have grown a state of dependence upon the investors as well.  

Laws and licensing requirements in New York

This aspect of the law of the land regulates the functioning of these life settlement companies. It is necessary for all the companies to have the proper licensing authority with them before they start functioning. Most of the Sates in the USA maintain a strict licensing guideline and are very serious about them in any type of policy they sell. However, the laws are different in different provinces, but they need to be followed everywhere. The implications of these licensing regulations are also of varied nature but every life settlement company, dealing in life insurance policies must follow them at any cost.