The Life Settlement Concept

	THE LIFE SETTLEMENT CONCEPT
	Until recently, the only options for liquidating an underperforming or unneeded policy was to let it lapse, sell it back to the original insurer for its current net cash surrender value, or exercise a policy non-forfeiture option.
	But thanks to an increasingly competitive secondary market, known as life settlements, life insurance is no longer being treated as simply a death benefit. Like other types of personal holdings, life insurance has evolved to become an asset with a fair market value and may be sold by its owner at a market price higher than its net cash surrender value under specified circumstances.
	This sale of an insured’s existing life insurance policy to a third party known as a life settlement provider in exchange for a lump sum cash payment is called a life settlement. A life settlement is for an individual who does not have a catastrophic or life-threatening illness or condition. In a life settlement, the sale price is less than the policy’s face value, but is higher than the policy’s net cash surrender value. Upon selling one’s insurance policy to a life settlement provider, the policy owner is relieved from making future premium payments.
	Now, instead of retiring a life insurance policy for its net cash surrender value, letting it lapse, or exercising a non-forfeiture option, you can sell the policy and use the money you receive through the transaction to fund other investments, make cash donations to a charity of your choice, supplement your retirement nest egg or income, purchase replacement life insurance, if needed, or provide education funds to a deserving family member.
	Life settlements can offer access to financial resources and provide you with a way to enhance your current cash position, eliminate your premium payment obligations, extract value from a potentially underperforming asset, and reduce or eliminate your debt.
	A life settlement transaction does not guarantee that one’s retirement dreams or any other financial or lifestyle goals will be achieved. A life settlement transfers ownership of the policy to a person who does not have an insurable interest in the life of the insured but rather acquires a financial interest in the early death of the insured. Once the policy is transferred, the original policy owner has no control over subsequent transfers, and there is no limit to the number of subsequent transfers that may occur. Accelerated benefits may be offered by the insurance company, which should be considered carefully before making a decision. The tracking procedures that will be used by the purchaser of the policy to determine whether or not the insured has died include but are not limited to: The insured agreeing to provide periodic health updates and/or to periodically update the designated contact information. The insured agreeing to list three (3) designated contacts that can be contacted from time to time for information regarding the insured’s health status (these contacts will have a “professional relationship” with the insured, for example, a primary physician, an attorney, an accountant, a financial advisor, etc., family members, who are at least 18 years of age should only be designated so long as they understand and agree to be contacted). The policy owner has the right to rescind a life settlement contract within thirty (30) days after it is executed by all parties or within fifteen (15) days from the receipt of the life settlement proceeds to the owner, whichever is less.