Life Settlement FAQ

Life Settlement is the sale or transfer of the death benefit or the ownership of the life insurance policy by the owner of the policy where the owner does not have a life threatening illness or condition. Basically the owner of the policy receives huge amount on the sale of its policy and the Life settlement company becomes the new owner and the beneficiary of the life insurance policy and they also become responsible for paying of the future premiums of the policy.

Life Settlement Transaction are complicated financial transaction, therefore they are generally carried and conducted by experienced professional financial advisors on the behalf of the clients.

The parties those are involved in the Transaction are:-

• Seller or owner of the policy
• Financial Advisors
• Life Settlement Provider
• Life Settlement Broker
• Life Expectancy Provider
• Investors
• Tracking Agent

The seller or the owner of the policy is the major part of the transaction. As it depends on the owner of the policy that whether they want to sell their policy or not? It is on the decision of the owner that the transaction is taken forward and brought into monetary terms.

Financial Advisors are involved on the request of the owner. As the Transaction is complex and requires some one who is expertise in the areas that are taken into consideration while the procedure of the transaction. The Financial Advisors plans the financial security of the client, look upon the tax implication, the security of life policy that will be affected by the transaction and also handle the accounts involved in the transaction.

Life Settlement Provider serves the part as the purchaser in the life settlement transaction and is responsible of paying the amount or price to the client. The price is greater than the policy’s cash surrender value. The Providers fund many transaction in a year and hold’s the seller’s as a premium and confidential portfolio asset. They are well versed and experienced in the analysis and valuation of the policies and their huge face value amount. They work directly with the advisors in order to develop a transaction that is customized according to the need and demand of the client requirement and their situation. They have in-house conformity departments that review the transaction carefully and most important they have a back up set and are funded by institutional funds. Life Settlement Providers has a verified license of the state where the policy owner resides so that they don’t face any legal complications during or after the transaction.

Life Expectancy Providers are specialized and independent companies that issues reports on life expectancy and also it estimates the life expectancy of an individual especially of those whose life insurance policy involves a life settlement transaction. They cannot predict as to how long will a person live but they calculate the average survival time of the individual. Life Expectancy providers are actually the medical underwriters or consultants who utilize models or tables of propriety mortality life that helps them to do the advanced calculation of the average survival rate of an individual.

Life Settlement brokers work for those financial advisors who does not wish to submit the cases of the policy owners who wish to have a transaction with the life settlement providers to the providers rather opt to work through brokers. Life Settlements Brokers work as an intermediary who tries to bring together the policy owners and Life Settlement providers under one roof for the sale and purchase of the policy. Brokers charges fees for the work ad help they provides. As all buyers are different and unique therefore brokers take special care and ensure that the policy owner goes to the right buyer and the transaction is closed without much difficulty and hassle. It is unlikely that a financial advisor will get the highest possible price without consulting life settlement brokers. It is the duty of the brokers to collect bids and pass it to the advisor; however it is the advisor who helps the client to evaluate the offers considering some facts such as offer price privacy provision, stability of fund and many more…

Investors also known as risk takers, they are the finance entities as they provide the capital or finance for the life settlement transaction that is providing the cash for the purchase of the life insurance policy. Investors might use their own capital to purchase such policies or they may arrange the fund through other investors undergoing through a variety of structures. Life settlement providers are the entity that enters into the transaction with the policy owners for purchasing the policy and in return pays the owners when the transaction is agreed and closed. In most of the cases the providers have a written agreement with the investors underlying the fact that they will be providing with the fund needed to acquire a policy. This shows that the Investors are the ultimate under for the monetary transaction however in some transaction the provider itself acts as an investor and uses it own capital to purchase the policy for its portfolio.

Tracking Agents generally provides information to the investors about the whereabouts and mortality status of the investors. They use variety of methods to collect the required information such as phone, email or other social security database. Most of the tracking agents also assist in premium management, collection of death benefit from the insurance company and reporting service.

The procedure that takes place for the life settlement transaction is undertaken by these parties and it varies from policy to policy or from individual to individual as to how the steps of the transaction will take place and whom to involve and whom to not. It depends on the owner of the policy as to how to carry on the transaction and which steps to be taken and also some part of it depends on the Life Settlement provider as they are buyer and they are the one who is providing the cash for the policy.