How is the value of a life insurance policy determined?

There are a number of factors that can have an influence on a policy’s value. The policy type, death benefit (face) value, cost of premiums to maintain the policy, any outstanding loans and the age and health of the insured are all taken into consideration.

What is the difference between a life settlement and a viatical settlement?

A viatical settlement is when an insured with a terminal or chronic illness sells their life insurance policy. The proceeds of the sale are often used for medical care or to cover other expenses.

A life settlement is the sale of a policy where the insured does not have a terminal or chronic illness. The reasons for selling vary and are generally changes in the need to provide for dependents, wanting to reduce premiums, requiring cash for other expenses, or that the policy is simply no longer required.

Is it possible to retain part of the death benefit value?

It is possible to retain a portion of the death benefit, and the new owner will generally pay all premiums but will only have rights in connection with the portion that is being sold.

Will the insured be required to have a medical examination?

No. Valuations will be based on a review of your medical records. There is no additional requirement for a medical check-up.

Can the owner change their mind about selling?

Yes. You are under no obligation to sell your policy and can withdraw at any time. Once the policy is sold, and depending on your state of residence, there is a rescission period which allows you to change your mind, take back ownership of the policy and return the cash payment received. This time frame is generally 15 days from receipt of the funds however this does vary from state to state.

Will the owner be taxed on the proceeds made from the sale of their policy?

Any payment that you receive in exchange for your policy as a life settlement may be taxable. It is strongly recommended that you seek advice from your financial advisor before proceeding with a life settlement.

How long does a life settlement transaction take?

It can take from around two to four months from start to end. This includes the time required for collection of documents including medical records, allowing time for potential buyers to analyze the policy and make bids, then finalising the sale after a bid has been accepted.