Find answers to all of your life settlement questions
Find answers to all of your life settlement questions
What is a life settlement?
A life settlement is the sale of a life insurance policy to a third party in exchange for a cash settlement. Typically, this sale results in a lump-sum cash payment of four or more times its cash surrender value. After a life settlement, the new policy owner will be responsible for future premium payments and will control the policy’s death benefit.
What is the cash surrender value of a life insurance policy?
Sometimes referred to as cash value, the cash surrender value is the amount the policyowner receives if they surrender the life insurance policy to the insurance company before a death benefit is paid. This is equal to the cash value of the insurance policy minus costs and fees.
Why would someone sell their life insurance policy in a life settlement?
There are several reasons someone may choose to sell their life insurance policy in a life settlement. If the life insurance policy no longer serves its intended purpose, is too expensive to maintain, or the policyowner needs the money now are just a few examples. In all cases, a life settlement helps convert the policy into cash to be used as desired for any purposes including personal, business, or estate planning.
A life settlement is an advantageous alternative to letting an obsolete policy lapse or surrendering for cash value, as the sale price is typically much higher than the policy’s cash value.
Selling Your Life Insurance Policy
Can I sell my life insurance policy myself?
Yes, you can. While life settlements have long been a highly intermediated process with lots of “middle-men” – brokers, advisors, agents, etc. – consumers can directly sell their policies as well. When considering selling your policy, we recommend turning to a licensed and reputable life settlement provider so you can get the best price for your policy, and so you know the transaction – and your personal information – are safe and secure.
Can I sell a portion of my life insurance policy?
Yes, in some instances you can sell a portion of your life insurance policy. This type of sale generally allows you to raise extra cash while retaining some of the policy’s death benefit. Our team can review your options with you and let you know if a retained death benefit is an option for you.
Can I sell multiple policies?
Life insurance policies are your property, like a piece of jewelry or a car. You can always sell any piece of property you own, and that includes multiple life insurance policies. You’ll just have to meet certain eligibility requirements to qualify.
Can I sell my group policy from my employer?
If your group life insurance is either a permanent policy or a convertible term policy, and can be separated from the group, you may be able to sell it through a life settlement. If you have questions about a group policy, contact the team at Lighthouse Life. We’ll be able to answer your questions and discuss your unique circumstances with a zero-pressure call.
Can I sell my term life policy?
In many cases, you can sell your term life insurance policy through a life settlement. Most term policies that qualify for a life settlement have a conversion rider, but in some cases, non-convertible term policies can qualify, too. There are several steps to take to determine eligibility and sell your term life policy. Lighthouse Life details the process and everything you need to know here.
What types of policies qualify for a life settlement?
Most types of life insurance can be eligible for life settlements, including universal life, whole life, and even term life policies. Find details about life settlements for these different types of policies here.
A life settlement is the sale of a life insurance policy to a third party in exchange for a cash settlement. Typically, this sale results in a lump-sum cash payment of four or more times the policy’s cash surrender value. After a life settlement is complete, the new policy owner will be responsible for future premium payments and will control the policy’s death benefit.
Life Settlement Payouts
How is the value of my life insurance policy determined?
When determining the value of your life insurance policy for sale, we will look at factors including your age and health, the face value of the policy, cost of premiums, and the type of policy. These are the things buyers will value most when making an offer to purchase your policy.
How much is my policy worth?
No two policies are the same, and values will vary depending on the specifics. The average policyowner receives a payout of four or more times the policy’s cash surrender value. To better understand what your unique policy is worth, get an estimate from the Lighthouse Life life settlement estimate calculator. These estimates are fast, free, and easy to understand.
How much is the average life settlement payout?
On average, policyowners who qualify and choose to sell their life insurance policy through a life settlement receive a payout of four or more times the policy’s cash surrender value. Every sale is different, and results may vary based on a number of factors. However, a life settlement always pays more than lapsing or surrendering a policy.
What factors affect my life settlement payout?
Life settlement payouts are based on the value of the policy, considering factors such as face value, type of policy, and cost of future premium payments. Factors such as how long you’ve had the policy and how much you’ve paid into it do not affect your final payout.
Why is my estimate smaller than the size of my policy?
No life settlement can be worth more than the face value of a policy, and most life settlements are for between 10% and 30% of a policy’s face value, although each policy is unique and is valued accordingly. While we try to provide as accurate an estimate as possible, the estimate presented by our calculator is based on limited information about the insured person and the policy and should be considered preliminary. If you qualify and wish to move forward with a life settlement, our team will gather additional information that enables us to provide a much more accurate valuation, and the final offer may be different from the initial estimate.
Life Settlement Process
How long does the life settlement transaction process take?
At Lighthouse Life, many life settlements are complete within 60 days. In some instances, you may receive settlement proceeds in as little as 45 days. Many other life settlement companies can take six months or longer to complete these transactions.
Is my information kept confidential?
Life settlement companies are required by law to protect information about your identity, finances, and health. When selecting a company to work with, be sure to ask questions about the steps they take to protect this information. Lighthouse Life offers industry-leading consumer protections and disclosures to keep your information secure.
What happens after I sell my policy?
After completing a life settlement, your insurance policy will be transferred to a new owner. This new owner assumes responsibilities for premiums as well as beneficiary payouts. You will have received your lump-sum payment for the sale, which can be used in any manner you choose. Many choose to use this money to pay for healthcare or toward retirement savings.
Taxes & Fees
Will I have to pay any fees for a life settlement?
As a consumer, you should not expect to have any out-of-pocket fees for a life settlement. Lighthouse Life operates with transparency that exceeds industry standards around fee and transactional information disclosures. We promise low and transparent fees with every transaction.
Will I have to pay taxes on my life settlement?
While Lighthouse Life does not provide tax guidance or advice, we can provide some general information about how taxes affect life settlements.
Life settlements are generally taxable if you earned a profit on the sale. That profit up to the cash surrender value will be taxed as regular income. Any profit beyond that figure will be taxed as long-term capital gains. Certain individuals, such as those who meet the IRS definition of a terminally ill individual, may receive all settlement proceeds tax-free. You should always check with a tax advisor to determine tax liability or for other tax-related questions.
Will I owe premiums after my policy is sold?
No. In almost all cases, the new policyowner will be responsible for any premiums after the sale is complete. However, you should plan to continue paying premiums until the sale is final. Missed payments leading up to the sale could result in lower value and bids for your policy, or the inability to sell the policy altogether.
Of course, if you’re only selling a portion of your policy, you may still be responsible for reduced premiums.
How do I know if I qualify for a life settlement?
The only way to know for sure if you qualify for a life settlement is to have a conversation with one of our team members. Pre-qualification can be completed in under five minutes via phone or contact form. Most people who qualify are over the age of 65 and have an insurance policy with a face value of at least $100,000.
How old do I have to be to sell my life insurance policy?
Generally, you must be at least 65 years of age to qualify for a life settlement. You may still qualify if you are younger than 65 and have a significant health issue. If you have any questions on qualifications, fill out our form or give the Lighthouse Life team a call.
How can a life settlement help me?
A life settlement can help in many ways. Circumstances can change, and you don’t have to be stuck with a policy that no longer works for you. Turning that policy into cash can help with retirement savings, plan for healthcare costs, and avoid lapses or low cash surrender values. The payout from this sale can be used as you please without restrictions.
Who is an ideal life settlement candidate?
Most people who qualify for life settlements are age 65 or older, have an insurance policy with a face value of $100,000 or more, and have had a change in health since the policy was issued. Be sure to contact us to see if you qualify, even if you do not fit within these guidelines.
Are life settlements regulated by any institutional or federal agencies?
Life settlements are regulated by individual states’ Departments of Insurance. Today, life settlements are regulated in 43 states, which equals roughly 90% of the nation’s population. These regulations offer significant consumer protections. Lighthouse Life also provides transparency and disclosures above those regulations to make sure our clients feel safe and secure.